FILE PHOTO: A sign hangs outside a Lloyds Bank branch in London, Britain, February 21, 2017. REUTERS/Toby Melville/File Photo
March 1, 2019
LONDON, Mar 1 (Reuters) – Lawmakers have criticized a move by Britain’s Lloyds Banking Group to impose more expensive and complex overdraft fees on customers only months before a regulatory clampdown.
Nicky Morgan, chair of the powerful Treasury Select Committee, said the charges by Britain’s biggest domestic bank “fly in the face” of clarity and transparency.
Lloyds, which has a 38 percent market share in basic bank accounts, began rolling out a tiered system of overdraft charges from last month, increasing charges for anyone borrowing less than about 4,100 pounds ($5,443).
The bank previously charged a flat daily rate of 1 pence per 7 pounds of borrowing, but the new staggered charges start at 1 pence for every 6 pounds of credit, meaning more fees are racked up on lower sums.
The Financial Conduct Authority (FCA) has published proposals to drive down high overdraft costs, including a ban on tiered charges, with enforcement potentially starting as early as December.
The watchdog said the average arranged overdraft across the British banking sector is about 250 pounds.
“It’s puzzling that whilst welcoming the FCA’s simplification proposals, Lloyds Banking Group has introduced such a complex tiered system for – potentially – a relatively short period of time,” Morgan said.
In a letter to Morgan, Lloyds Chief Executive Antonio Horta-Osorio defended the fee changes and said the bank had already moved to help customers by removing higher charges on unplanned overdrafts, in line with the FCA’s recent proposals.
A spokesman for Lloyds said the lender would reflect on the points raised by the Treasury Select Committee.
The spokseman added: “We have been working closely with the FCA and other stakeholders on overdrafts and we are fully participating in the FCA’s consultation process.
“Overdrafts are an important issue and we will continue to listen to the views of the FCA and other stakeholders on the need to bring more clarity and transparency.”
(Reporting by Iain Withers; Editing by David Goodman)