Strengthened intervention rules for repeat overdraft users in financial difficulty take effect

The Financial Conduct Authority's strengthened intervention rules for repeat overdraft users showing signs of financial difficulty took effect on 4 November 2024, under CONC 5D.3.2R of the FCA Handbook¹. The rules sit alongside the earlier repeat use requirements at CONC 5D.3.1R, which carry a date of 18/12/2019¹.

Under the new rule, where a firm identifies a customer with a pattern of repeat use and signs of actual or potential financial difficulties, it must promptly communicate with them, highlight the pattern of overdraft use and indicate that it may be resulting in high avoidable costs¹. The firm must encourage the customer to make contact to discuss their situation and explain that doing nothing could make things worse¹. If the customer has not been in touch after a reasonable period and the pattern continues, the firm must take reasonable steps to contact them¹. Guidance states a "reasonable period" is unlikely to be longer than one month¹.

In those discussions, the firm must explore the reasons for the overdraft use and for the financial difficulties, and what the customer is doing or intends to do to address them¹. It must then promptly identify and set out suitable options designed to help the customer reduce overdraft use over a reasonable period and to provide support for their difficulties, without adversely affecting their financial situation¹. The firm must also explain that failing to engage or act could lead to the overdraft facility being suspended or removed, or the credit limit reduced¹. Those consequences do not apply where suspension, removal or a reduction would cause financial hardship¹.

The guidance lists options a firm could identify where assessed as appropriate, including advice on budgeting and money management, such as adjusting payment dates or setting up alerts; forbearance and other support, including reducing or waiving interest and charges, allowing additional time to pay, refinancing the overdraft debt onto an alternative credit agreement on more favourable terms, or agreeing staged reductions in the overdraft limit and balance; and a reduction in the credit limit or suspension or removal of the facility¹.

The rules do not require firms to use a particular form of words, and firms have discretion to tailor the language and tone of communications to the individual customer's circumstances¹. Where a customer is already identified as being in financial difficulties and is already receiving appropriate forbearance, the rules do not require the firm to do anything inconsistent with that treatment¹. Where a Debt Respite moratorium is in effect for a customer's overdraft and the firm is complying with it, the firm is not required to take these steps in relation to that debt during the moratorium¹.

Why it matters for households

The rules apply to people who repeatedly use an overdraft and who show signs of actual or potential financial difficulty, as identified by their bank or lender¹. From 4 November 2024, firms covered by CONC 5D.3.2R must make contact rather than wait for the customer to get in touch, and must set out options intended to reduce overdraft use and address the difficulties¹. The guidance indicates that the period before a firm must take further steps to contact someone who has not responded is unlikely to be longer than one month¹.

The rules also set out what can follow if a customer does not engage or act: the firm must, after a reasonable period, consider whether to keep offering the overdraft and whether to reduce the credit limit¹. That consideration does not apply where suspension, removal or a reduction would cause financial hardship¹. The guidance states that an overdraft is not generally suitable for long-term use that results in a high total cost burden¹.

What happens next

The FCA Handbook shows CONC 5D.3.3G, the guidance accompanying these rules, carries a date of 26/06/2026, and the section was last updated on that date¹. No further dated steps are set out in the material available.