Lloyds TSB overdraft changes: a step in the right direction but with a sting in the tail

Lisa Taylor, analyst at moneyfacts.co.uk, comments: “With overdraft charges already in the spotlight, and undoubtedly a target for the Office of FairTrading (OTF) to intervene and impose reductions, Lloyds TSB has been the first off the mark to announce reductions to its fees. Perhaps they are pre-empting the OFT’s actions and softening the blow, but it also provides great positive publicity.

“While the returned item fee has seen a clean cut reduction from £35 to £20, the changes made to its excess overdraft charge could be more costly for some borrowers. The tiered structure to the charges would indicate that serial and excessive abusers of overdrafts agreements could be severely punished, with an excess of over £100 for a full month costing a whopping £215 in fees. For those customers who make infrequent or small excesses, the charges seem much fairer at a flat monthly fee of £15 plus £6 per day for excesses of less than £25.

“Current account fees are becoming more complicated and less transparent. While it is in the interest of consumers to see fees reduced, complicating the market and including ‘ifs buts and maybes’ into fee terms and conditions can only cloud the consumer’s understanding.

“The grace period offered by Lloyds TSB cannot be faulted; only too often do unexpected cheques and automated payments catch borrowers unawares, with many realising their mistake and keenly waiting outside the branch doors at opening time to pay in, only to find the decision has already been made.

“The final enhancement Lloyds has made is to offer a text alert service to notify borrowers if they become within £50 of their limit. In principle this appears to be a good idea, but I suspect it will only appeal to a niche group of customers who teeter around their limit. But many of these customers even with an alert, may not have the means to stay within their limit.

“By keeping borrowers informed of their account, it is passing the responsibility back to them. While it can not be disputed that overdraft charges are unfair, the borrower does have a role to play. After all if you act within the rules of your account, you receive free banking.”