Lloyds Banking Group today announced a simplification of its charges for personal current account overdrafts across its three main brands Lloyds Bank, Halifax, and Bank of Scotland.

Charges for overdrafts currently depend on whether the balance is within a pre-agreed limit (arranged usage) or exceeds this limit (unarranged usage). Charges include tiered interest rates, monthly and daily fees for arranged usage, daily fees for unarranged usage, and fees when payments are not paid due to lack of funds. These will all be replaced with a single rate of 1p per day for every £7 of arranged overdraft usage, linking the amount charged to the amount and period of borrowing. All fees and charges associated with unarranged overdrafts will be removed, including daily fees, interest and unpaid item fees. Lloyds will also charge fees at the end of each day of arranged overdraft usage, rather than customers accumulating fees to be charged weeks later.

Lloyds says that customers with large overdrafts may pay more in charges, and if necessary will be offered a review of alternative credit options available, such as a personal loan, which may better meet their underlying borrowing needs.

Frontier has advised Lloyds Banking Group through successive regulatory investigations into current account charging over thelast 10 years. Paul Cullum from Frontier said “The Competition and Markets Authority’s (CMA’s) main concern in its recent market investigation was the cost of unarranged overdraft charges, and Lloyds has now responded by removing them. With better price comparison tools and Open Banking also emerging from the CMA’s remedies, Lloyds may also be better placed to compete with new entrants in the changing market landscape.”