/ Money

Update: are you over the moon with Lloyds’ new approach to overdrafts?

Overdrafts Dossier

Lloyds Banking Group is reshaping its overdrafts to make them simpler. However, whether they will prove less costly for everyone is yet to be seen. How will these changes affect you?

In some very welcome news, we’re pleased to tell you that there has been some significant progress in our campaign against exorbitant unarranged overdraft fees. Today, Lloyds Banking Group has announced it is doing away with these fees.

This positive step sees Lloyds Bank, Bank of Scotland and Halifax simplifying their policies so that all fees and charges for unarranged overdrafts will be removed and, instead, all customers will pay a simple daily rate for using an overdraft with charges assessed on how much customers borrow and for how long. This new policy is due to be introduced in November.

Industry change is overdue

As you may know, unarranged overdraft fees have been a significant concern for Which? given the consumer harm caused by these charges, and we’ve been campaigning for change. What Lloyds has shown is that it is possible for banks to improve the way they operate their overdraft systems and therefore we now look to the other banks to follow suit.

This is, of course, not a magic solution – not everyone will be better off from this. So, it is critical that Lloyds Banking Group supports customers to help them avoid high charges and to reduce their level of debt.

Supporters helping bring about change

In order to show the harm caused by unarranged overdraft fees, today Which? submitted an evidence dossier to the Financial Conduct Authority (FCA) using the experiences that have been shared with us on Which? conversation and by supporters of the campaign. A lot of statistics have been bandied about in the overdrafts debate, but we wanted to ensure impact on individuals and their families is recognised and properly understood.

We heard from a lot of people with the same concerns as Adrian:

‘My bank charged me but it was their charges that sent me overdrawn and each month it becomes a vicious cycle. I’m on disability benefits, so I have limited income.’

Extortionate, disproportionate fees featured heavily in the stories we heard, like Mike’s:

‘My bank also charged me £30 per day for being overdrawn for just £2 for a total of 20 days. Then they also charged me with an unauthorised overdraft of another £30+ interest! Total cost nearly £1000 which was more than my wages! So I kept getting charged every month!’

Flo’s relation suffered a particular injustice when it came to fees and charges for letters:

‘The action of one bank caused a relative’s bankruptcy. If they went overdrawn, not only were they charged £70 for a letter but also another £80 for the unauthorised debt that the cost of the letter caused. This would then trigger another letter at £70. And so on. Despite this they offered to give them a loan as long as previous loans, some of which were nearly paid off, were consolidated into a new loan, ie ‘churning’. By their actions they caused more debt.’

Which? Overdrafts Dossier

Click the image above to the read our overdrafts dossier to the FCA. (PDF 1.9Kb)

We’re banking on further change

The FCA is currently reviewing high cost short term credit (including overdrafts) and we want it to use this review to ensure other banks follow Lloyds’s lead by restricting unarranged overdraft charges to the same level as for arranged overdrafts.

So, while it’s a big step forward today we know there’s still lots more to be done in this area. Hopefully our dossier of your experiences will help to make more change possible. Thank you to you all for sharing your experiences with us, enabling us to show the real life detriment felt by consumers.

Update: 2 November 2017

As of today, unarranged overdraft charges and monthly overdraft usage fees have been scrapped for Lloyds, Halifax and Bank of Scotland customers.

Overdraft customers of these three banks will instead pay a new flat fee of 1p a day for every £7 they borrow. So those who find themselves dipping into their overdrafts for should be slightly better off from today.

We first heard about this news back in July and welcomed the move by these banks. It’s a big step forward in limiting unarranged overdraft charges and bringing these fees more in line with those for arranged overdrafts. We now want to see other banks to follow suit and bring an end to these extortionate charges.

Are you an overdraft user? Have you been affected by extortionate fees in the past? Tell us whether you’re looking forward to these new changes, and why, below.


52%per year no thanks

Rod Varley says:
17 August 2017

I have a significant overdraft facility which I have had for 30 years and have been a Lloyds Bank customer for over 50 years. I use this facility a lot but regularly pay money into my account which either eliminates my overdraft or substantially reduces it. This costs me around £1,800 per year but they now want over £5,000 for the same usage.
I went into a Lloyds Bank this morning and they confirmed the figures.
Shylock only required a pound of flesh – Lloyds want to totally fleece this OAP!


Rod, my bank charges 50p a day if I go into overdraft up to my limit. Would this be a better arrangement for you? Alternatively, could you take out a personal loan and top up your account with it, rather than using an overdraft?

Bill Trevillion says:
22 August 2017

I have had an arranged overdraft of £6000 for many years and it cost me approx £75-£80 per month.
I never go over the limit, but have been unable to reduce it.
As from November the fees will increase to £265 per month – taken on a daily basis
I work full time but I am in financial difficulties and unable to get a loan
This will all but bancrupt me


It might be worth talking over your problems with Citizens Advice as soon as possible, Bill. Your interest is helping to subsidise free banking for those of us who manage to stay in credit and few seem to care.


Have you tried to get a personal loan from your bank to put your account in credit? Have you discussed your problem with your bank to see how best to deal with your situation? It is nonsense to pay £3180 a year to service a £6000 overdraft. Seemingly one consequence of Lloyds policy of making unarranged overdrafts as acceptable as arranged. It raised the effective interest rate for higher overdraft users to over 60%, according to a report I saw. Presumably why your new charge has rocketed.


Lloyds will not entertain a loan to pay off the overdraft. I spent over 1 1/2 hrs on the phone to them yesterday. All they could suggest was to speak to a debt company helpline. I have banked with them since 1980 and have never incurred late charges or gone over my limit.
I am currently trying to arrange a loan with someone (at higher interst rates). Failing that – a DMP or bankruptcy beckons


A colleague I know has an overdraft of £15000 with Lloyds. I informed him yesterday of their plans come November 2nd and he is really worried (his payments will be £664 per month (taken from his account at £21.43 per day)