The Competition and Markets Authority (CMA) has introduced a new rule requiring banks to set up an alert system to notify its customers when they are about to go overdrawn.
A recent investigation by the CMA has revealed that banks received around £1.2bn a year from unarranged overdraft charges.
This new rule has already been adhered to by a number of banks which already have alert systems in place, but the rule requires all banks to send alerts via texts or a mobile banking app.
The alert system will apply to new customers and is expected to be introduced to existing customers soon.
“People will now be told when they are about to slip into overdraft, which could help them avoid potentially costly charges,” said Adam Land, senior director at the CMA.
“And the changes we are requiring from today make it easier for small firms to switch to another bank for their current account or to obtain a loan.
“These new rules – which are a result of our recent retail banking investigation – are part of a wider package that will help people to get the most out of their banks and force them to work harder for their customers' money.
“The overdraft alert system is one of four new measures that are being implemented today to improve the service people receive and make it easier to switch between different banks.”
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