/ 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.


Do you have a link to the actual Lloyds statement?

I am curious as to the position on returned items.

Tony Bradshaw says:
12 July 2017

There’s a link in the article, in the second paragraph.

If you follow the link you would find it is another Which? page.

Which Is why I asked for a direct link as sometimes they can be more revealing. So:

If you are not a media professional though you should read this release:

Lloyds providing all the quotable data to make the media’s life easy. Very thoughtful .

I am a retired person with severe health problems on a basic pension, having to visit the hospital I was kept in unexpectedly, I had gone over the top by under £5, I could not get to the bank and they charged rediculas money for me being overdrawn for 2 days.

PR Wickenden says:
12 July 2017

I’m with Nationwide. They offer a choice of accounts, one has a charge relating to the size of the borrowing, the other two have a daily fee when in overdraft. In my current circumstances, I much prefer the former and do not want to see a switch to daily fee with no alternative, but I remember a time when multiplying fees just made the debt bigger – I could not see the light at the end of the tunnel. Why can’t all banks offer both options?

Mrs t c says:
12 July 2017

I’ve been stuck in this vicious cycle and became very unwell because of it my old bank made life impossible we wasn’t using the overdraft but still the fees and the interest were keeping us stuck in that situation and unable to get out worried not sleeping HSBC cold calling 4-13 a day our bills not getting paid kept defaulting and us occurring crippling charges for defaulting £70 etc for my car insurance. but would let their overdraft money and fees go out the same day. Every day me and my husband tried to explain our desperate situation that I was unwell recently lost my father to cancer, been homeless had to move around a lot, lost a baby. Never wanted the informal overdraft or the account I was on due to they told I never put enough into that account to qualify for a formal overdraft for years. This all happened to we had to buy a second hand sofa and battery for our car my aunt had told me she had put some money in my account and I thought I saw it had cleared but it hadn’t so the money got taken but my aunts money and she had gone travelling and was unreachable for long periods of time so couldn’t tell her that her funds were reversed out of my account and now was a problem leaving to incur months of overdraft fees as we had struggled trying to pay it pack and our efforts every month getting wiped out all will whilst trying to live on my husband wages and pay the bills and rent.

Alex Crawford says:
12 July 2017

Hi Mrs t c
I suggest you look for help in managing the situation from;
Look after yourself too!

Hello Mrs T C. What a horrible story. Myself and the team are really sorry to hear this and want to offer the services of Which? wherever we can to help you. I can forward your message onto our Money Helpline if you think this will be of assistance? Please let me know if you think we could be of any more help. Dean.

Lulu says:
12 July 2017

Too little too late.
I am a Lloyds customer. I have been a good customer but been charged hundreds of pounds in these charges, often being put into OD by there charges or when only a couple of pounds over. I signed up for account alerts by both text and email, which for some reason are never delivered . I have asked to receive these alerts numerous times however have been told repeatedly I haven’t. In April, I was told charges would be removed as a courtesy, last week, two months later, thess charges hit my account £100, plus a returned DD because these charges came out that day. The company charged me for the payment being returned as well. I completely sick of it. 😡😡😡😡
Because of this I will still switch to Tandem Bank as soon as they go public- unless Lloyds refunds me ALL my back charges but I won’t hold my breath.

Sue Schofield says:
12 July 2017

I used to bank with R.B.S . My wages were paid late several times and as a result all my direct debit were rejected with a fee for each one. Over a period of about 12 weeks I’d accrued debts of over £1000 fees. My bills took ages to catch up on with additional charges and I ended up having to sell my house to get out of the mess.

Someone broke my EBay account and made 4 purchases running up a £4,000 unauthorized overdraft overnight on my Santander account. The bank sent me 4 notification letters charging £25 for each one. Although all the money for the false transactions was refunded Santander wouldn’t refund the £100 overdraft fees stating that because I had authorized EBay to take money from Santander, they treated the transactions as legitimate.

Halifax are wonderful you get a letter saying we are changing your account tough if you don’t like it reward was five pounds now reduced to three went in for help with my mother in laws account believed some one was fraudulently using it they would not help I was waiting for power of attorney which I now have first thing I did was close the account and moved it to Yorkshire bank who moved heaven and earth to help us at a very difficult time as she had started with dimensia

Derek says:
12 July 2017

Hooray Lloyds but you’ve had £00s if not £000s off just me through the years increasing my debts .

Barclays sent me insane, refused to help me financially despite having £300,000 equity in my property and having a well paid job, all because of a loan missed payment that they couldn’t pin point for 5 months.

This is very much a 2 -way story and not necessarily the bank’s being to blame. The unapproved overdraft problem is an age old problem making it difficult for the Banks to balance their books. So easy to blame the bank for overdrawing your account with bank charges. Probably justified due to the customer incurring the charges in the first place. In our society today when something goes wrong who is genuine enough to accept the responsibility for their actions? We can’t do that, can we? Not if we can blame somebody else and receive financial compensation!!!

Harry Hoogan says:
13 July 2017

Sounds like you’re a banker, hmmm who bailed out the banking system when it failed due to incompetency in 2008 ? The British tax payer!!! It’s all one sided a corrupt system
still paying massive bonuses! !! The banks will never lose.

I am not about to blame anyone for my current situation – although over the years I have suffered financially though so called ‘expert’ advice (Persuaded to take out an endowment policy to cover my mortgage in the early 1980’s for example – this realised a shortfall and I had to sell the house to cover the residual debt – oh and I was not eligible for any sort of compensation).
Anyway, I have been working hard to try and turn things around – saving £5 here and £10 there to reduce my outgoings. Then Lloyds anounce that my £75 per month O/D charges will increase to £265 per month

I am currently with Clydesdale bank , i currently get charged £6.00 per month on my current account , if i go over my overdraft they then charge me £6.00 per day , even if it a few pence over , best thing is i never find out until i receive a letter nearly a week later or sometimes no letters at all , so end up with charges around £30 – £40 per month sometimes over that if they fail to pay my direct debits ,which they then slap a £15 charge on for each one that they don’t pay , i have noticed that they will take the charge off to take me over my overdraft ,but won’t pay direct debits ,

That is bloody irritating when they won’t agree to paying an item due to an excess but are happy to create an excess with their charges; thus creating further charges and a snowball effect.

Banks will fade into the background when blockchain transactions become the norm and centralised ledgers die out in favour of decentralised ledgers in blockchain. Banking will then be in the hands of the masses.

Clare says:
12 July 2017

This is good news, but it seems those of us with a planned overdraft of £1k or more are even more stuffed than usual. I give up, seriously. Life is worth nothing when you’re struggling this much all the f*cking time.

I was watching a money programme on TV today. A couple who bought plenty of things “nice to have” – a new car on PCP, lots of clothes, holidays, but who had no control over the organisation of their finances. They had run up unauthorised overdrafts, paid regular fees for direct debits that could not be paid and bounced back – between them around £3000 a year in penalties. Now, whether you agree with the fees charged or not, this couple illustrated irresponsible spending. What they needed was either some common sense, or/and some education in how to budget and live within their means. Who should provide this? If we give sex education in schools surely we should also prepare people for life with basic financial education?

I understand that one result of Lloyds’ move may be to make no further payments from an overdrawn account that was not arranged. A good move, I think. If people are suitable to operate an overdrawn account, because their income and outgoings may not coincide but they still deposit as much as they withdraw, then they should ask their bank for the facility.

I think this will not help people to be organised. When the banks made the move away from having to keep £100/£250 in your account to get free banking, I just carried on keeping the money as a “float” in my account. Interest rates are so bad you won’t get much for it in a savings account anyway.
To the person who was having recurring problems with alerts not being actioned, all calls to banks are usually recorded so provided you keep a note of the name of the person you spoke to and the time, the call centre should be able to listen back to it, though in a large centre it will take them a while. Also check your e-mail spam folder. Some of my genuine e-mails consistently end up in mine despite my adding them to the address book.

The big four have a track records for scams, people are seduced by their clever advertising.

June says:
12 July 2017

I have an ARRANGED overdraft with Nat West. On occasions that I have gone over my very generous limit, I have been charged. I feel stupid now having read the info from WHICH. I will be talking to my bank forthwith. Thank you WHICH

There is, if you think carefully about it, no such thing as an unauthorised overdraft. If a customer does not have an agreed arrangement, then the bank should simply NOT PAY the item that would send an account into debit. By paying the item, the bank of course actually authorises the position. When I first worked in banking, (1964), it was the practice to refuse payment (bounce) a debit to an account if it would make an account overdrawn. This ensured far greater financial discipline among customers in those days. Then, as the Blessed St Shareholder began to rule the roost, banks suddenly twigged that here was a great way to make bigger profits. Allow an overdraft and fine the customer. Utterly immoral.

Extremely well put, Patrick.

AND the only thing that hasn’t improved since 1964 is the time to clear a cheque. Why not?

Nailed it Patrick. Amoral attitude to customers hidden by previous good reputation built up over decades.

It needs time to get back from where you pay it in to the originating bank to check that 1) The account is still open 2) It has enough money in it 3) The cheque is correctly drawn e.g. not post dated 4) The signature is correct 5) The customer has not placed a stop on it etc

Indeed, but that can all be done electronically.

Where would they actually do that though? That would potentially involve some sort of central bank with details for every UK customer of every bank. Plus a lot of forgeries are very good and can only be spotted on actually handling the actual cheque.

They could take a lesson from the insurance industry, which cross checks each application across the Insurance world. No – the real reason that nothing’s changed in that regard is simply because Banks are at once the most conservative of businesses and the most reckless. Cheque processing is mired in regulations drafted more than a century ago, and could easily be brought up to date. It’s not that long ago that the big four warned they’d not be dealing with cheques after a certain date, an announcement quickly retracted in the ensuing outcry.

I had charges twice though I had paid in large cheques on both occasions prior to the charges unfortunately the cheques had not cleared in time. Felt unfair as obviously the money was in my account.

The cheque(s) may not have been honoured by the payer’s bank, so the funds are not in your account until the cheques clear.