Banks must now text you if you’re about to slip into your overdraft
Rules which come into force today means customers will be alerted when they're about to go into the red
BANK customers will be warned when they're about to slip into the red, thanks to new rules which come into force today.
Brits will receive a text message or get a warning on their mobile banking app when their balance is low and could be hit with overdraft charges.
The scheme was first unveiled by the Competition and Markets Authority (CMA) in 2016, after it carried out an investigation into UK banking.
It found that the banks make a whopping £1.2billion a year in overdraft fees and the CMA hopes the new system will save consumers a "significant" amount of money.
Some banks already have message systems in place but the rules mean now all bank customers will be alerted if they're about to slip into the red.
Customers will also be given a "grace period" of a few hours after the alert is sent so they can put money into their account and avoid the overdraft charges.
But Royal Bank of Scotland (RBS) has warned that some of its alerts could arrive up to a day late for some customers up until September.
If an alert is sent late, the bank must stop and penalties being charged or refund them.
The new scheme will apply to new customers automatically from today and will be rolled-out to all existing customers this month.
The Financial Conduct Authority (FCA) found that customers who have already signed-up to text alerts on their mobile banking has reduced monthly unarranged overdraft charges by around 24 per cent on averaage - or £11 a year for each customer.
Adam Land, senior director at the CMA, said: "People will now be told when they are about to slip into overdraft, which could help them avoid potentially costly charges.
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"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."
In November Lloyds Bank introduced a shake-up to the way it charges customers who use their overdrafts.
Customers are now charged a single rate of 1p per day for every £7 of overdraft use.
But some Lloyds and Halifax customers were failed to be notified that they were close to going into their overdraft following a "technical glitch" with its messaging system.
A spokesman for RBS said that the bank will fully comply with the rules by September and that no customer will be left out of pocket if they don't get a message on time.
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