Table of contents
- Why have you contacted me about this and why now?
- What do you mean by ‘overdraft repeat use’?
- What do I need to do so I am no longer considered in repeat use?
- Why does it matter if I'm in overdraft repeat use?
- Why are you writing to some customers about this, but not others? My friend/family member has an overdraft facility with you but hasn't received a letter about this.
- Does this mean that customers who aren't in repeat use aren't entitled to an support?
- Have I done anything wrong?
- How can you make these changes to my account when I've already signed my agreement and kept to it?
- Is this affecting my credit score?
- What's the best way to reduce repeated use of my overdraft?
- Are there any other ways to help me manage my finances?
- What are the other products which offer better interest rates?
- Will you stop me from using my overdraft?
- You're already aware that I'm struggling to pay monthly interest - why are you asking for more?
- I'm already on a repayment plan - is there any impact on this?
- Where can I get help if I'm worried about my finances?
- How much will the debt advisory agencies charge me?
Why have you contacted me about this and why now?
As a responsible lender, we review customers’ overdraft limits to make sure they’re meeting their short-term borrowing needs. If we see that an overdraft is being used regularly, we’ll get in touch. We will contact you to make you aware you may be incurring high and avoidable costs and also that there may be a cheaper borrowing option available instead of using your overdraft.
This is in line with Financial Conduct Authority (FCA) rules to ensure customers are not using overdrafts repeatedly, to the point where the interest will cause financial difficulties. As a result, overdraft providers are taking a series of steps, including providing support to customers where their pattern of overdraft use may result in high and avoidable costs.
What do you mean by ‘overdraft repeat use’?
This is where you’ve used your overdraft for more than 50% of the time over a 3-month period.
Why has the FCA introduced rules about overdraft repeat use?
They’re concerned some customers might be using their overdrafts over a long period of time. This means they may have higher borrowing costs, as overdrafts are only meant for short-term borrowing. By switching to a long-term borrowing product, the interest rate may be lower and could save customers money.
I’ve received a letter about overdraft repeat use. Why is this?
The FCA rules mean we have to take a series of steps when you’re in repeat use. The aim of these are to provide support, as well as to help you save money. This is why we’ve contacted you.
When we first contact you to tell you you’re using the overdraft repeatedly, it’s to explain that your pattern of overdraft use may be resulting in high and avoidable costs. As a general rule, the longer you use your overdraft the more it will cost overall. By reducing overdraft use, you could save money. We’re also providing information to help you review your monthly commitments, as well as let you know where you can get free and impartial help if you ever need it.
How many of these letters/communications will I receive?
Our first letter lets you know that you’re in repeat use. It explains that your pattern of overdraft use may be resulting in high and avoidable costs. At this stage, we also provide supporting information to help you with budgeting and show where you can get support if you need it.
We’ll get in touch again after 6 months to let you know how you’re getting on. At this time, we’ll take another look at how you’re using your overdraft. This is important because if you stay in repeat use we may have to take further action. This could include suspending/reducing your overdraft limit.
If you do stay in repeat use, a final communication will be sent after 12 months from the date of our initial letter. This may result in HSBC reducing your overdraft facility and options will be discussed with you at this stage.
What do I need to do so I am no longer considered in repeat use?
To no longer be considered in repeat use, you’ll need to reduce your overdraft use. So you know how you’re progressing, we’ll send a further communication 6 months after the initial letter to let you know how you’re getting on. This will confirm that you are either:
- no longer considered in repeat use
- have reduced your usage, but are still considered in repeat use
- still considered in repeat use
Why does it matter if I'm in overdraft repeat use?
Why are you writing to some customers about this, but not others? My friend/family member has an overdraft facility with you but hasn't received a letter about this.
We’re only writing to customers who are categorised as in repeat use. It may be that your friend/family member hasn’t used their overdraft facility repeatedly. If they’re in a similar situation, then we’ll write to them at the appropriate time.
Does this mean that customers who aren't in repeat use aren't entitled to any support?
A lot of the information we’re providing could be useful, whether you’re in repeat use or not. For example, any overdraft user can benefit from reviewing their pattern of use and looking at what they pay in interest. All customers can ask for support with their financial concerns.
The FCA have asked us to focus particularly on customers who may have been using overdrafts repeatedly, incurring high and avoidable charges. This is so we can help and provide support if needed.
Have I done anything wrong?
Under your overdraft terms and conditions if you have remained within your overdraft limit, you haven’t done anything wrong. However, you may be paying more than you need to in interest, which is why we’re letting you know and encouraging you to review and reduce your overdraft usage.
How can you make these changes to my account when I've already signed my agreement and kept to it?
There’s no change to what you have to pay under your overdraft agreement. Whilst we’re encouraging you to reduce the use of your overdraft if you can, it’s up to you to decide if you want to do this.
If you decide not to change the way you use your overdraft, there are certain steps we may take. This could include reducing, suspending or removing your overdraft facility. We issued a Notice of Variance to the agreement in November 2019.
We’ve also updated the Personal Banking Terms and Conditions and Charges’ - effective from 17 November 2019, to reflect the changes
Helping you manage your finances
We'll keep an eye on your account and how you're using your overdraft for signs you might be struggling to make payment. If we think you are, we'll get in touch to explain the different ways you can get help, including how we can help you.
Is this affecting my credit score?
No. If you have stayed within your agreed overdraft limit, your credit score will not be affected.
What's the best way to reduce repeated use of my overdraft?
There are different ways to reduce repeated overdraft use. Some examples are:
- review your monthly commitments - this can help you to reduce or remove unnecessary expenditure
- reduce the number of days each month you use your overdraft - this can make a difference, even if only a few days
- create a budget that looks at your earning and spending to help you identify where your money is going and where you may want to make changes
- reducing your overdraft by transferring funds in from any other accounts you may have
- have a look at other borrowing options that could meet your long-term borrowing needs - this may help to reduce your monthly interest charges
Are there any ways to help me manage my finances?
There are a number of ways you can look to reduce spending or increase your income. Some examples are:
- reviewing your tax codes to ensure you are paying the right tax. Visit gov.uk/guidance/hmrc-tools-and-calculators
- checking you’re receiving all the benefits that you’re entitled to. Visit gov.uk/benefits-calculators
- checking for any tax credits you might qualify for. Visit gov.uk/tax-credits-calculator
- reviewing your utility bills. You may be able to make big savings by switching provider or just changing tariffs. There are lots of different comparison websites that can help you find the best deal.
- reviewing all your borrowing. Ask yourself if you have the right products to meet your needs.
You can also keep a track of your spending:
- through the mobile banking app
- through the online banking
- by setting up text alerts
What are the other products which offer better interest rates?
Will you stop me from using my overdraft?
If you’re in repeat use over 2 consecutive 6-month periods, we may have to stop further spending on your overdraft. This may happen if you can’t (or choose not to) reduce your overdraft use.
You're already aware that I'm struggling to pay monthly interest - why are you asking for more?
If you’ve already contacted us to discuss your circumstances, or you’re already on a repayment plan, we’ll continue to work with you. We’re not asking you to pay more if you can’t afford to. However, we do need to make you aware of what could happen if you use your overdraft repeatedly over a long period of time.
I'm already on a repayment plan - is there any impact on this?
No. Your repayment plan isn’t affected.
We appreciate you may not be able to immediately reduce your overdraft use from what you are currently using. However, we do need to make you aware of what could happen if you use your overdraft repeatedly over a long period of time.
Where can I get help if I'm worried about my finances?
If you feel you’re not in a position to reduce the usage of the overdraft, or are worried about your finances in general you can find more help at:
You can get independent help and advice from free and impartial organisations, some of which are listed below.
National Debtline (if you’re self-employed)
StepChange Debt Charity
Money Advice Service
How much will the debt advisory agencies charge me?
The agencies mentioned above offer support free of charge. There may be other service providers in the market who charge for this service. Make sure you check when contacting them.