CONC 5C.3 Interest rates for unarranged overdrafts to be no more than the interest rates for arranged overdrafts

1. (1)

   1A firm must not:

   1. (a)

      enter into an agreement with a customer that provides for payment by the customer of an unarranged overdraft charge; or

   2. (b)

      impose on a customer, who enters into an unarranged overdraft, an unarranged overdraft charge,

   unless the charge satisfies the conditions in (2) or (3) (as applicable).

2. (2)
   1. (a)

      This sub-paragraph applies where:

      1. (i)

         the customer concerned has an arranged overdraft in connection with the personal current account; and

      2. (ii)

         interest can become payable on some or all of the balance of that arranged overdraft.

   2. (b)

      The rate of interest that applies to the unarranged overdraft must not exceed the rate of interest referred to in (a)(ii) that applies to the arranged overdraft.

3. (3)
   1. (a)

      This sub-paragraph applies where (2)(a) does not apply.

   2. (b)

      The firm must take reasonable steps to identify the type of personal current account provided by it (referred to in this sub-paragraph as the “comparable account”):

      1. (i)

         that bears closest resemblance to the personal current account held by the customer;

      2. (ii)

         in connection with which an arranged overdraft can arise:

      3. (A)

         of an amount equivalent to the amount of the unarranged overdraft; and

      4. (B)

         that can attract the payment of interest; and

      5. (iii)

         that has been made available to a significant number of its customers.

   3. (c)

      The rate of interest that applies to the unarranged overdraft must not exceed the relevant rate of interest identified in (d).

   4. (d)

      The relevant rate of interest for the purposes of (c) is:

      1. (i)

         where there is only one rate of interest that applies to arranged overdrafts connected to the comparable account, that rate; or

      2. (ii)

         where there are two or more rates of interest that apply to arranged overdrafts connected to the comparable account, the highest of those rates that is imposed on a not insignificant number of the customers to whom the account has been made available.

1If a firm imposes an unarranged overdraft charge in contravention of CONC 5C.3.1R(1)(b), the obligation to pay the charge is unenforceable against the customer and the customer is entitled to recover any sum paid by, or on behalf of, the customer under the obligation imposed.