Nationwide’s customers hit by near-40pc overdraft fees

NATIONWIDE is to double overdraft rates as it becomes the first lender to respond to a clampdown by regulators which was supposed to stamp out rip- off fees.

The building society will charge a single interest rate of 39.9pc on agreed overdrafts and remove fees on its main bank accounts. This is higher than the rate on most credit cards and more than double the 18.9pc it charges Flex Account customers.

The move comes after the Financial Conduct Authority banned fixed daily or monthly charges and ordered banks and building societies to charge a simple interest rate instead.

It was designed to stop banks from charging higher prices for unauthorised overdrafts than for authorised ones, but the announcement led to warnings that lenders would try to make up their losses elsewhere.

Other banks are expected to announce higher rates in the coming weeks. Lenders made more than £2.4bn from overdraft fees and charges in 2017, with around 30pc coming from unauthorised overdrafts.

Nationwide’s Flex Account customers pay a simple 18.9pc interest rate on authorised overdrafts. Its Flex Direct and Flex Plus account holders pay 50p a day. Nationwide said the new 39.9pc interest rate amounts to a charge of 46p a day based on a £500 overdraft.

Moneycomms’ Andrew Hagger said: ‘It is a total shock that Nationwide considers it acceptable to charge almost 40pc for an arranged overdraft.’

A spokesman said: ‘Our aim is to make everyday borrowing simple, transparent and to put members in control, which is why we’re moving to a single, consistent overdraft, for all our current accounts.’

An FCA spokesman said: ‘We said the overdraft market was in need of fundamental reform, so welcome early moves to reduce price complexity and improve transparency.’