Lloyds TSB, part of the Lloyds Banking Group which is part-owned by the taxpayer, said today that it was caving into growing pressure from customers and reducing its current account overdraft charges.
The UK’s biggest current account provider will cut the monthly fee for going into the red from £15 to £5. It is also halving the charge for an item that cannot be paid because there is not enough money in the account and an overdraft has not been arranged from £20 to £10, with a maximum of three fees charged per day.
The new fee structure, which is coming into effect in December, which also see the introducing a new £10 buffer zone for both authorised and unauthorised overdrafts, on which people will not be charged fees or interest.
However, consumers who use an arranged overdraft facility will be hit with a new £5 charge, while standard current account customers will no longer earn interest on their money.
The move comes after huge pressure from the Government on banks to reform the way that customers are charged for going into the red following a legal challenged by the Office of Fair Trading (OFT) to investigate the legality of overdraft charges, which ended last year.
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The OFT lost the long-running case in the Supreme Court but a number of high street banks, including Santander and Barclays, have reduced the cost of overdraft charges in the wake of the case.
Kevin Mountford, head of banking at moneysupermarket.com, the price comparison website, said: “It is good to see further initiatives from a major player in the banking industry on overdraft charges, and the reduction of fees will certainly help some customers.
“For those who flirt with their overdraft every now again and keep under the £10 limit then the free buffer is helpful.
“But unfortunately, those who go into their authorised overdraft will now pay an additional £5 for the privilege on top of the 18.9 per cent interest they are already charged.”
Lloyds TSB has said that all customers who went into unauthorised overdraft would pay less under the new system, with 70 per cent being charged less than half of what they currently pay.
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Mike Regnier, personal current account director at Lloyds TSB, said: “We have made a whole range of improvements to our charging structure, including a significant reduction in fees.”
The group is the latest to change the structure of its unauthorised overdraft fees following a High Court test case on the issue. The banks won the case, but the Office of Fair Trading is still working with them to make their charges fairer and easier to understand.