The Financial Conduct Authority (FCA) are asking banks to explain their overdraft pricing decisions as the new rates start at around 40%.
Banks are introducing the new rates as they are preparing to comply with new FCA rules starting on 6 April which will prevent providers charging higher prices for unarranged overdrafts than arranged ones.
The new rates mean customers will be charged around double or more from what they have previously been charged.
In a letter the FCA is asking bank to explain their charging decisions.
The letter reads, “We are writing to you to understand more about your new overdraft pricing and the measures you have in place to help customers who may be adversely impacted by the changes you are making to this pricing.”
From next month, First Direct, HSBC and M&S bank are introducing new rates of 39.9%. NatWest will charge up to 39.49% for their customers.
Barclay’s new overdraft rate will 35%, TSB will be charging their customers 39.9% and Nationwide Building Society has imposed a single rate of 39.9%. Llyods Banking Group will be charged new personalised overdraft rates of a whopping 49.9% from 6 April.