Over the past few days there has been significant comment about many headline overdraft rates, and in particular that major banks have aligned overdraft rates around 40%.

The FCA study into the overdraft market concluded that it was dysfunctional. In particular, consumers found it very difficult to understand what charges they were paying and charges for unarranged overdrafts were very high, regularly ten times the cost of a payday loan. These charges fell heavily on consumers who are vulnerable.

Our reforms of the market have ended high unarranged charges, saving typical borrowers up to £55 per month on an unarranged overdraft of £100 over seven days.

Confusing fees and charges have been banned, and the cost of overdrafts has been made more transparent. For many occasional borrowers the removal of fees means they will pay less even though their headline rate of borrowing may increase.

Major banks and building societies have been releasing their new rates – with most setting very similar prices.

The FCA added it expects firms to take positive steps to help customers who may be worse off or in financial difficulties as a result of these changes and has asked to see plans for how the most affected customers are being dealt with.

The watchdog said it expects banks to take steps to support them, for example, firms could reduce or waive interest, offer a continuation of overdraft borrowing at current rate of interest, or agree a repayment programme – including a personal loan.

The FCA said it will be keeping a close eye on the market and will act should it see continued harm.