From April 2020, the FCA will introduce new rules making the costs of overdrafts clearer meaning lenders will be increasing interest rates substantially. We, at AIT Accountants as expert accountants look at the ramifications for business.


A recent announcement that the Financial Conduct Authority (FCA) has confirmed it will introduce new rules from April making the costs of overdrafts clearer appears to have led to lenders pushing up interest rates to eye watering levels.

Whilst the FCA’s moves are a welcome step for all in business, it has created a trigger reaction from lenders, which has not gone unnoticed.

We at AIT have been asked to explain the situation to many clients.

On the plus side, the FCA move does simplify overdrafts as we believe for too long banks have made following interest rates unnecessarily complex.

The new rules will mean banks can only charge for overdraft users a straightforward annual interest rate – without the additional fees and charges, which cause so many issues.

The FCA, in their announcement say around seven out of 10 overdraft users will benefit or, at the very least, see no change in cost.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, in making the announcement said the changes will show the true cost of an overdraft and that they have also got rid of high prices for unarranged overdrafts.

Mr Woolard added: “This will result in a fairer distribution of charges, helping vulnerable consumers, who were disproportionately hit by high unarranged overdraft charges, and many people who use their overdraft from time-to-time.”

However, the banks reaction in hiking the interest rates they charge on overdrafts substantially is alarming, and a sizeable proportion of the largest providers are set to introduce rates of up to 40%.

The move has created financial friction and in return the FCA has sent a letter to the providers asking them to explain what has determined their decision and to ask how the banks will handle customers who could be worse off following the changes.

It is promising that the regulator is taking a close interest and we at AIT, likewise, will be keeping a close eye on developments.

If you need any advice on this or any other accountancy matter, please get in touch with our team who will be happy to help.

Why choose AIT Accountants?

AIT are accountants and Business Advisers that predominantly serve small and medium sized businesses. At AIT, we provide tailored accountancy services, which are always director led, so you can be sure that your account is overseen from the top.  It also means that you can be confident enough to leave everything with us, and get on with the important task of running your business.

We also offer reassurance as we have wide experience of dealing with many different business sectors making us one of the most professional and adaptable accountancy practices in the west midlands region.

Our expertise lies in:-

  • Year-end accounting
  • Management Accounting
  • Tax Returns and Advice
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