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Comment: Lloyds Banking Group Overdraft Charges PDF Print E-mail
Wednesday, 12 July 2017
Following the announcement from Lloyd’s Banking Group is to abolish fees for retail customers who fall into unplanned overdrafts, Mark Somers, COO at 4most, the global credit risk consultancy, argues that this is in fact misleading to customers and that a more responsible approach should be undertaken.

Mark Somers, COO at 4most said: “Today’s announcement from Lloyds follows Barclays’ decision not to penalise customers for unauthorised overdrafts, and we would expect other major banks to follow suit.

“The interest charges on unauthorised overdrafts are still high – currently higher than 68% APR, once typical charges have been included – and while lower than they were, there is still no sign of risk-based pricing.

“Their marketing of these charges as 1p in £7 per day is misleading, as it implies to customers that this is ‘cheap money’. A more responsible approach would be for banks to pro-actively offer to turn overdrafts that account for more than 25 per cent of monthly income into a repayment loan at a much lower rate.

“However, looking ahead we expect increased competition from open banking based services that collate overdraft debt into more affordable loans and other forms of money management services. This will, in turn, force high street banks to further reduce rates over time.”
 

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