Ah, yes. I see. Looks like the link I found has been superceded now by this guidance. Measure 2 being the relevant part.
Some firms have recently increased their overdraft prices. Firms must review their prices to ensure they are set at a level that is consistent with the obligation to treat customers fairly in the light of the exceptional circumstances arising out of coronavirus.
In particular we expect firms to ensure that customers are not worse off when compared to prices charged prior to the publication of PS19/16. For all firms, they will need to demonstrate to the FCA that the rates they charge are consistent with this guidance.
Regarding the first paragraph, my question would be if Monzo consider that customers who have an overdraft and aren’t currently using it are being treated fairly by having their rate changed as, not currently using it, they’re not being put in an immediate worse position.
Regarding the second, that would be what you would need to investigate to see if the change to your rate is actually OK, and would be what you may want to refer to when contacting Monzo (asking something like “Is the change to my rate consistent with the FCA guideance that I’m not worse off compared to prices charged prior to publication of PS19/16?”).
Hope that’s of some help in unpicking what the press release you quoted may actually mean for you.
I’ve moved this discussion onto the general ‘virus response’ thread rather than have it running separately on a blog post so that similar discussions at least sit somewhere close together.
Considering that the due date for the implementation of this new FCA rule was today, I’d expect your interest to be capped from today forward.
The FCA (and other people) identify that there will be 14 days of interest charged at the higher rate between the rules on new Overdraft coming in on the 1st April, and the new FCA guidance coming in today.
So I’d imagine what you’re seeing is expected, but going forward it’ll probably be capped, hopefully we’ll hear something from Monzo on this soon.
How have you determined that the rate has more than doubled for you?
The FCA gives no specific guidance to on how to determine whether overdraft customers are no worse off, and in my mind it’s not a straightforward comparison for banks that have gone from a fixed fee to an APR charge. So am interested to know how you have done your comparison.
Prior to March 2020 my overdraft charge was a consistent 15.50 as the overdraft is at its limit.
It now costs ~£21. I’m no mathematician, but i’m definitely worse off until such a time as the overdraft is reduced.
Yes, you will be. From April 1st all overdraft charges were “simplified” by the FCA, removing the daily fee. Instead you were switched to one of 3 percentage based fees.
What the FCA have announced is that you should from today onwards be no worse off than you were previously. However, you will have 14 days of interest at the new rate to pay.
This was communicated out extensively to everyone who had an overdraft.
To clarify – what you’re experiencing right now is not unexpected, but from this day forward should be capped in theory.
“In theory” if i do the lottery enough times i’ll win. Unless the overdraft rate, which clearly says in the app is 39% is going to change overnight I would be surprised if Monzo have added additional logic in their charging to “cap” anything.
They have to, it’s a rule that the FCA have stated all banks must abide by. I don’t know why you’re doubting Monzo adding new logic in to cap things… when they have to do it.
You have 16 days to find out what the situation is when you get to the end of the month, and reach out to Monzo closer to the due date for the interest if it’s not been capped.
You will pay 14 days at your increased % of 39%, and then up to 50p per day for the remaining 16 days of the month (£8). So you will end up paying more than £15.50 for this month.
If this doesn’t happen, then Monzo haven’t interpreted the FCA ruling correctly, but as we keep saying on here - nothing has been publicly announced so it’s all speculation here based on what the FCA have stated.
You were never paying 15% though? Monzo have only previously offered a fixed 50p/day fee, and then switched everyone to a % fee of 19%, 29%, or 39%.
Its irrelevant what i’m using, I can see clearly in the app that monzo have changed my overdraft to the new pricing structure, regardless of the figures, it represents an increase in the overall overdraft and is not in line with what the FCA advised banks to do at this time.
Monzo don’t have to decrease or change your pricing model
Monzo have to make sure you don’t pay anymore under the new scheme starting today than you otherwise would have - which would be a CAP, not a % change.
I do not see Monzo switching everyone back to the old pricing model as that could leave some people worse off. What you’ll see is a cap being implemented I would imagine - but as pointed out many times, it’s unknown at this point & is just speculation.
Also, to add, as interest is calculated at the end of the day, your interest for today hasn’t yet been calculated under the new scheme - so the amount you’re seeing due at the end of the month is 100% correct.
It’s completely relevant. You’re only worse off if your equivalent rate has changed. To work out the rate you need to know what your balance was in the months you were using your overdraft, not just how much you’ve been charged.
Yup, it’s uncharted territory for a lot of companies, and people right now - so best thing is take a note of whatever your interest is today, and then so long as doesn’t go up by more than ~£8 you’ll be fine, if it does, reach out to support.
It is also totally irrelevant to this thread. You are complaining about your overdraft rate which has nothing to do with Coronavirus, and anything that your bank can do to help you. Your overdraft rate was communicated extensively, and it was changed because the FCA thought it would be helpful to give you percentage instead of a fixed fee.
stay safe.