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BBC
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The Times
https://www.thetimes.co.uk/edition/n...ions-n8t5tftpb
Lloyds Bank to abolish charges for unplanned overdrafts.
Fees for unplanned overdrafts are to be scrapped for the 20 million customers of Lloyds Banking Group, which includes the Halifax and Bank of Scotland.
From November this year, any customer going over their overdraft limit will face no fees at all, Lloyds said.
However, the bank may continue to block payments from the account until the overdraft is paid off.
It follows criticism of high charges by consumer groups and the Competition and Markets Authority (CMA).
The Financial Conduct Authority (FCA) is also expected to propose measures on overdraft fees within the next few weeks, as part of its inquiry into high-cost credit.
Previously Lloyds customers taking out unauthorised overdrafts faced interest payments at an annual rate of 19.89%, a daily charge of up to £10, the monthly charge of £6, and up to £30 a day for returned (unpaid) items. These will all now be abolished. Fees for missed payments from basic bank accounts will also disappear.
Lloyds said that it expected to make less money as a result of the changes, although it said fewer people now use an unauthorised facility than used to be the case.
As well as scrapping charges for unplanned overdrafts, Lloyds is also simplifying fees for planned overdrafts, making it cheaper for many customers to borrow.
Those with overdrafts of less than £500 are likely to pay less, while those borrowing more than £1000 are likely to see higher charges.
Barclays has already abolished unauthorised lending. Since June 2014, customers cannot exceed their overdraft limit, unless they obtain permission for emergency lending.
Anyone who takes out an authorised overdraft with Lloyds Banking Group - in other words the bank has agreed to it - is currently charged a £6 monthly fee, on top of interest at 19.89% a year.
While the £6 fee will be dropped, the interest charge will rise sharply, to 68.4% on an annual basis. Lloyds said that amounts to 1p a day for every £7 borrowed.
As a result nine out of 10 customers will either be better off, or see no difference, it said. However, the changes will not make Lloyds the cheapest lender on the market.
Andrew Hagger, personal finance expert with Moneycomms, said there were at least eight banks providing lower cost overdrafts.
The move by Lloyds to abolish unauthorised borrowing fees was welcomed by consumer groups. "Lloyds' decision to do away with these fees is a positive step, and its proposed simpler pricing will benefit many of its customers," said Peter Vicary-Smith, Which? chief executive. "However, not everyone will be better off, so it's critical that Lloyds supports customers to help them avoid high charges and to reduce their level of debt." The FCA should encourage other banks to follow suit, he added.
As part of its inquiry into current accounts, the CMA ruled last year that banks should introduce a maximum monthly charge - set by each bank - by the end of September 2017.
Lloyds is due to introduce a maximum monthly charge of £95 for unauthorised overdrafts in August, although this will be superseded by the changes in November.
RBS and NatWest will introduce a £90 maximum on 24 July.
HSBC is to remove interest charges on most unarranged overdrafts, but will still charge a £5 daily fee, up to a maximum of £80 a month.
Fees for unplanned overdrafts are to be scrapped for the 20 million customers of Lloyds Banking Group, which includes the Halifax and Bank of Scotland.
From November this year, any customer going over their overdraft limit will face no fees at all, Lloyds said.
However, the bank may continue to block payments from the account until the overdraft is paid off.
It follows criticism of high charges by consumer groups and the Competition and Markets Authority (CMA).
The Financial Conduct Authority (FCA) is also expected to propose measures on overdraft fees within the next few weeks, as part of its inquiry into high-cost credit.
Previously Lloyds customers taking out unauthorised overdrafts faced interest payments at an annual rate of 19.89%, a daily charge of up to £10, the monthly charge of £6, and up to £30 a day for returned (unpaid) items. These will all now be abolished. Fees for missed payments from basic bank accounts will also disappear.
Lloyds said that it expected to make less money as a result of the changes, although it said fewer people now use an unauthorised facility than used to be the case.
As well as scrapping charges for unplanned overdrafts, Lloyds is also simplifying fees for planned overdrafts, making it cheaper for many customers to borrow.
Those with overdrafts of less than £500 are likely to pay less, while those borrowing more than £1000 are likely to see higher charges.
Barclays has already abolished unauthorised lending. Since June 2014, customers cannot exceed their overdraft limit, unless they obtain permission for emergency lending.
Anyone who takes out an authorised overdraft with Lloyds Banking Group - in other words the bank has agreed to it - is currently charged a £6 monthly fee, on top of interest at 19.89% a year.
While the £6 fee will be dropped, the interest charge will rise sharply, to 68.4% on an annual basis. Lloyds said that amounts to 1p a day for every £7 borrowed.
As a result nine out of 10 customers will either be better off, or see no difference, it said. However, the changes will not make Lloyds the cheapest lender on the market.
Andrew Hagger, personal finance expert with Moneycomms, said there were at least eight banks providing lower cost overdrafts.
The move by Lloyds to abolish unauthorised borrowing fees was welcomed by consumer groups. "Lloyds' decision to do away with these fees is a positive step, and its proposed simpler pricing will benefit many of its customers," said Peter Vicary-Smith, Which? chief executive. "However, not everyone will be better off, so it's critical that Lloyds supports customers to help them avoid high charges and to reduce their level of debt." The FCA should encourage other banks to follow suit, he added.
As part of its inquiry into current accounts, the CMA ruled last year that banks should introduce a maximum monthly charge - set by each bank - by the end of September 2017.
Lloyds is due to introduce a maximum monthly charge of £95 for unauthorised overdrafts in August, although this will be superseded by the changes in November.
RBS and NatWest will introduce a £90 maximum on 24 July.
HSBC is to remove interest charges on most unarranged overdrafts, but will still charge a £5 daily fee, up to a maximum of £80 a month.
The Times
Britain’s biggest high street lender is to slash the costs of its overdrafts after widespread criticism of lenders’ rates.
Lloyds is abolishing all fees on unplanned overdrafts in a move that it hopes will avoid sanctions by the financial regulator while heading off competition from new lenders.
For customers with arranged overdrafts, Lloyds will replace several levels of fees plus interest with a daily charge of 1p per £7 of overdraft.
The change, which will take effect in November, will affect 20 million customers whose accounts are with Lloyds and its other brands, Bank of Scotland and Halifax, making up a quarter of the market. Nine out of ten customers will be better off, Lloyds said.
The shift by the bank may put pressure on rivals to follow suit, particularly as they face scrutiny by the Financial Conduct Authority over current accounts. The watchdog said last year that it would focus on whether overdrafts constituted high-cost credit. It will report its findings this summer.
But observers pointed out that while Lloyds is simplifying its charges, it amounts to a high sum when calculated as an annual percentage rate.
Dominic Lindley, a consumer campaigner, said: “1p per day per £7 of overdraft might sound little, it is actually equivalent to an effective annual interest rate of around 60 per cent. Overall, this means that arranged overdrafts at Lloyds cost around three times what they did prior to the financial crisis.”
In 2007 overdrafts at Lloyds cost 19.3 per cent. Lloyds believes its new system is fairer because most customers who dip into their overdraft only do so for a few days at the end of the month, so calculating the charge on an annual basis is misleading.
A customer with a Lloyds Classic Account who goes overdrawn by £100 within the planned limit for ten days will pay £1.40. Previously, they would have been charged £6.38, the bank said.
Lloyds is also scrapping a range of charges that are unpopular with customers, including the £5 or £10 daily fee it levies on unplanned overdrafts, which is in addition to 19.89 per cent interest. For planned overdrafts, Lloyds now charges 19.89 per cent on amounts that are more than £25 in the red. The bank also levies fees when a customer’s direct debits cannot be paid because they are in overdraft. Those charges will be dropped.
Unplanned overdrafts can be particularly expensive. Which?, the consumer group, calculated that fees could be almost eight times more than the cost of payday loans.
About a fifth of current account holders have unarranged overdrafts, which generated £1.2 billion of revenue for banks in 2014, according to the Competition and Markets Authority.
Lloyds’ move is likely to stir fresh controversy about overdrafts. Banks have argued that they have to charge high fees in order to cope with the administrative costs and financial risk of people going into debt in unpredictable ways. Lloyds will sacrifice significant income from the change but has priced its new offer so that it can continue to make a profit.
Lloyds is abolishing all fees on unplanned overdrafts in a move that it hopes will avoid sanctions by the financial regulator while heading off competition from new lenders.
For customers with arranged overdrafts, Lloyds will replace several levels of fees plus interest with a daily charge of 1p per £7 of overdraft.
The change, which will take effect in November, will affect 20 million customers whose accounts are with Lloyds and its other brands, Bank of Scotland and Halifax, making up a quarter of the market. Nine out of ten customers will be better off, Lloyds said.
The shift by the bank may put pressure on rivals to follow suit, particularly as they face scrutiny by the Financial Conduct Authority over current accounts. The watchdog said last year that it would focus on whether overdrafts constituted high-cost credit. It will report its findings this summer.
But observers pointed out that while Lloyds is simplifying its charges, it amounts to a high sum when calculated as an annual percentage rate.
Dominic Lindley, a consumer campaigner, said: “1p per day per £7 of overdraft might sound little, it is actually equivalent to an effective annual interest rate of around 60 per cent. Overall, this means that arranged overdrafts at Lloyds cost around three times what they did prior to the financial crisis.”
In 2007 overdrafts at Lloyds cost 19.3 per cent. Lloyds believes its new system is fairer because most customers who dip into their overdraft only do so for a few days at the end of the month, so calculating the charge on an annual basis is misleading.
A customer with a Lloyds Classic Account who goes overdrawn by £100 within the planned limit for ten days will pay £1.40. Previously, they would have been charged £6.38, the bank said.
Lloyds is also scrapping a range of charges that are unpopular with customers, including the £5 or £10 daily fee it levies on unplanned overdrafts, which is in addition to 19.89 per cent interest. For planned overdrafts, Lloyds now charges 19.89 per cent on amounts that are more than £25 in the red. The bank also levies fees when a customer’s direct debits cannot be paid because they are in overdraft. Those charges will be dropped.
Unplanned overdrafts can be particularly expensive. Which?, the consumer group, calculated that fees could be almost eight times more than the cost of payday loans.
About a fifth of current account holders have unarranged overdrafts, which generated £1.2 billion of revenue for banks in 2014, according to the Competition and Markets Authority.
Lloyds’ move is likely to stir fresh controversy about overdrafts. Banks have argued that they have to charge high fees in order to cope with the administrative costs and financial risk of people going into debt in unpredictable ways. Lloyds will sacrifice significant income from the change but has priced its new offer so that it can continue to make a profit.
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