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Lloyds' Control option for Classic account holders prevents any payments going out that would push the account over its agreed overdraft for a monthly fee. Banking editor Alan O'Sullivan wonders if this is a sign of things to come.
Out of options: desperate customers may see 'Control' as the lesser of two evils.
A new account from Lloyds allows customers to escape expensive unauthorised overdraft charges in a move that could be copied by the rest of the industry next year. However, the option could also increase the time it takes to pay by card at tills in shops, if it is trialled by more banks in the UK.
The move comes in the wake of the ongoing bank charges row, with the OFT losing its case against High Street banks last week that would have allowed them to judge them for fairness.
Those customers who regularly fall into an unauthorised overdraft and incur large fees will be offered a service by Lloyds called 'Control', which prevents any payments from going through on its Classic current account if there are not enough funds present.
Although it was introduced earlier this year, the service is expected to increase in popularity now that the battle to reclaim bank charges fell flat with last week's Supreme Court announcement.
It is not offered by any of the other major banking brands in the UK, although it is believed at least one of Lloyd's rivals is due to tap into growing unrest over bank charges by bringing in similar services early next year.
Lloyds' Control option for Classic account holders prevents any payments going out that would push the account over its agreed overdraft for a fee of £10 a month.
The customer still has to pay £10 for every refused payment, in addition to the monthly fee, but escapes Lloyds' standard £15 monthly charge and further fees of up to £25 a time if the payment is honoured or £20 if it is declined.
If the industry were to adopt such a measure, it could drastically add to the amount of time it takes to pay for items in retailers, as each transaction would have to be checked with the bank before going through.
Most retailers allow transactions to go through immediately if they are below their 'floor level', a maximum amount of risk each retailer is willing to take per transaction.
All of these moderate transactions, perhaps all below £20 in some stores, are held over until the end of the day when they are passed on to the customers' banks en masse. This is only possible if unauthorised overdrafts exist on the accounts to pay out cash even if there is not enough funds deposited.
If this system were removed, facing the possibility of unpaid bills, retailers would have to wait while their payment machine makes contact with a bank and approves the transaction, which increases the time each customer has to wait.
A spokeswoman for Lloyds said: 'For a lot of people, this is a big step to take. It means any payment would be bounced, including mortgage payments, so it's not right for everybody, only for those who are struggling to manage their finances.'
A customer will have their credit file marred if a payment is rejected by their bank and returned to a creditor, which may prevent the customer from obtaining loans in future. Banks insist this option should only be taken out by those who regularly overspend and rack up substantial overdraft charges per year.
Out of options: desperate customers may see 'Control' as the lesser of two evils. A new account from Lloyds allows customers to escape expensive unauthorised overdraft charges in a move that could be copied by the rest of the industry next year. However, the option could also increase the time it takes to pay by card at tills in shops, if it is trialled by more banks in the UK.
The move comes in the wake of the ongoing bank charges row, with the OFT losing its case against High Street banks last week that would have allowed them to judge them for fairness.
Those customers who regularly fall into an unauthorised overdraft and incur large fees will be offered a service by Lloyds called 'Control', which prevents any payments from going through on its Classic current account if there are not enough funds present.
Although it was introduced earlier this year, the service is expected to increase in popularity now that the battle to reclaim bank charges fell flat with last week's Supreme Court announcement.
It is not offered by any of the other major banking brands in the UK, although it is believed at least one of Lloyd's rivals is due to tap into growing unrest over bank charges by bringing in similar services early next year.
Lloyds' Control option for Classic account holders prevents any payments going out that would push the account over its agreed overdraft for a fee of £10 a month.
The customer still has to pay £10 for every refused payment, in addition to the monthly fee, but escapes Lloyds' standard £15 monthly charge and further fees of up to £25 a time if the payment is honoured or £20 if it is declined.
If the industry were to adopt such a measure, it could drastically add to the amount of time it takes to pay for items in retailers, as each transaction would have to be checked with the bank before going through.
Most retailers allow transactions to go through immediately if they are below their 'floor level', a maximum amount of risk each retailer is willing to take per transaction.
All of these moderate transactions, perhaps all below £20 in some stores, are held over until the end of the day when they are passed on to the customers' banks en masse. This is only possible if unauthorised overdrafts exist on the accounts to pay out cash even if there is not enough funds deposited.
If this system were removed, facing the possibility of unpaid bills, retailers would have to wait while their payment machine makes contact with a bank and approves the transaction, which increases the time each customer has to wait.
A spokeswoman for Lloyds said: 'For a lot of people, this is a big step to take. It means any payment would be bounced, including mortgage payments, so it's not right for everybody, only for those who are struggling to manage their finances.'
A customer will have their credit file marred if a payment is rejected by their bank and returned to a creditor, which may prevent the customer from obtaining loans in future. Banks insist this option should only be taken out by those who regularly overspend and rack up substantial overdraft charges per year.
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