Lloyds’ current account customers face paying 50,000% more for use of an authorised overdraft from December.
The state-owned bank used budget week to announce an overhaul in overdraft and in-credit interest rates.
Millions of customers with an agreed overdraft facility will pay a £5 monthly fee when overdrawn as well as the percentage interest rate. Customers who are overdrawn by £11 for only one day will see charges increase from about 1p to about £5.01, according to data firm Defaqto — a 50,000% increase.
In addition, Lloyds Classic account customers will no longer earn interest when in credit, and rates on the Classic Plus account will fall from 2.5% to 1.5%.
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The changes are the latest indication of banks recouping losses following the greater restrictions imposed on them by the government. Last week, the chancellor announced a £2 billion levy on banks, which the Institute for Fiscal Studies said could be passed on to savers. This could add £400 to the cost of banking for the average customer.
The Lloyds move follows a campaign by the Office of Fair Trading for “fairer” unauthorised rates. Customers with unauthorised overdrafts will benefit but those who agree an overdraft in advance are paying the price. Defaqto said authorised rates have risen from an average of 13% to 14.1% since June 2007, while unauthorised rates have fallen from 25.7% to 19.7%.