Lloyds TSB to cut overdraft fees

Lloyds TSB cashpoint machine
Image caption Going overdrawn without permission at Lloyds will become cheaper

Lloyds TSB is to cut the overdraft fees on its current accounts from December.

From 2 December it is cutting the daily and monthly fees for customers who go overdrawn without permission and will halve to £10 the fee for bouncing a cheque or electronic payment.

The bank admitted it was responding to complaints from its customers about how much they were being charged.

However authorised overdrafts will now incur a £5 a month charge, in addition to their normal interest charges.

"The reason we are making these changes is in response to customer feedback," said Mike Regnier, a Lloyds TSB director.

"Our customers are telling us that they still think our unarranged overdraft fees are too high and we are responding to that very directly by cutting them - and it is as simple as that," he added.


Lloyds also said it would stop paying any interest on its standard current accounts to customers in credit.

It currently pays just 0.1% annual interest to the account holders but will now pay nothing at all.

Lloyds, in which the government is a substantial minority shareholder, said most of its customers who went into the red without permission would now pay less than half their current level of charges.

"All customers who use an unplanned overdraft facility will pay less under the new structure," said Mr Regnier.

"Almost 70% of customers who use an unplanned overdraft will pay less than half what they currently pay," he added.

The changes

Customers who go into the red will still be charged interest and there is no change to the rate currently being levied of 19.3%.

The main changes to the Lloyds TSB overdraft fees are:

  • The £15 a month fee for running an unplanned overdraft will be cut to £5. It will be payable for using either an authorised or unauthorised overdraft
  • The £20 fee for bouncing a cheque or electronic payment will be cut to £10, with a continued maximum of three such fees per day
  • Customers who slip into the red by up to £10 will not have to pay any charges - a "buffer zone"
  • Daily fees for being overdrawn will be reduced from between £6 and £20 to between £5 and £10
  • The maximum number of such daily fees that will be imposed is going down from 10 a month to 8.

The consumers' association Which? said that, despite the cuts, it would still be very expensive for Lloyds TSB customers who went into the red without permission.

"You can still pay £40 a day for up to eight days a month," said Vera Cottrell of Which?.

"The fees are still very, very high, and customers with authorised overdrafts will now have to pay £5 where they did not before."


The bank's decision to make its overdrafts cheaper reflects intense pressure from the government and campaign groups.

Last month, the coalition government said it would stop "unfair" bank and other transaction charges.

Last year the banking industry was successful in defeating an attempt by the Office of Fair Trading to regulate its charges.

But the previous Labour government, and now the recently elected coalition government, both threatened to bring in new laws if bank charges were not made fairer and cheaper.

Last October, Royal Bank of Scotland - which is majority-owned by the taxpayer - cut its overdraft charges.

It was soon followed by Santander which started offering a bank account to mortgage customers that does not charge for unauthorised overdrafts, nor charge a fee for payments that bounce.

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