Starting from 2nd Nov, Lloyds are changing their overdraft fees and rates.

There will be no charge for unauthorised overdrafts, as I understand it,

but their rates will be charged at 1p for every £7 you are overdrawn, everyday.

I will be switching banks, so it won't bother me.

However, today I worked out the EAR that the new rates would be equivalent to.

If x is your current overdraft,

after 1 day you will be charged (x/7)×0.01=x/700.

So your overdrawn balance will be x+x/700 after one day, assuming you spend nothing else.

Factorize the x out, and this is the same as x(1+1/700).

After 365 days that will be x(1+1/700)^365 = 1.68x.

Therefore, the effective percentage increase over the year is 100*(1.68x-x)/x=100*0.68=68%!!!!!!

Have I made a mistake?

That is an obscene rate of interest!!!

They say in the literature they sent me that this is to make it easier to understand the charges and control your overdraft, which I find extremely disingenuous.

I would argue that it is nothing more than a greedy, profiteering, cynical ploy to profit from people, many of whom (including me) may already be struggling to keep their overdraft under control, and may not realize exactly how much more it will cost them.

Moreover,

I have not seen anywhere in their literature a statement of the EAR or APR.

I even phoned them this afternoon and asked what the EAR of the new charges is, and she could not give a figure.

They may be calculating their rates daily, but it does not mean the EAR cannot be calculated, as I have done above.

I'm not sure about this, so maybe someone who is well versed in credit law can clarify,

but I think that may even be illegal from the quick research I did. I

think it is a requirement that lenders provide a percentage EAR or APR rate so that consumers can make meaningful comparisons between lenders.

Is this correct? If so, can you give a reference to the appropriate piece of legislation?

Apart from my specific questions about the legality of this, I just wanted to warn people.

I'm surprised it hasn't been mentioned yet.

I'm trapped by this at the minute too

I have quite a sizeable overdraft with Lloyds and every time i think i'll try and reduce it, something else comes up and the money i was going to use has to be used on something else.

These new overdraft fees really do me over.

Apparently if you're in a large overdraft the advice was to consider a personal loan instead. All well and good if they would offer one..

I looked at other banks but i think unfortunately i wouldn't get accepted with the overdraft elsewhere - so my options at the minute are pay a ridiculous overdraft fee, or get a high interest loan :/

Is that the charges for an authorized overdraft or just unauthorized

So you have a £700 overdraft, The charges would be £1 a day, £365 a year

Sounds pretty over the top to me

This was for authorised. If I recall the letter correctly they have removed things like unpaid item fees,unauthorised overdraft fees or the general monthly fee to try and make this horrific idea look better...

If you go into unauthorised you get charged at your authorised limit. E.g if your auth is 700 and you are 800 you still only pay the 700 fees.

I have a large planned overdraft with Lloyds and now instead of it costing me £60-£80 a month, its going to cost me £190 a month! There's no way i can afford this and they won't give me a loan! How can this be allowed? And right before xmas too! Ive no idea what to do!!!

Amy_Elizabeth, i was in the exact same boat and had a very large unplanned overdraft. I also had a high (ish) APR loan with someone. Luckily LBG suddenly changed their minds on offering me a loan and now i have cleared my overdraft and the higher APR loan and pay overall about £80-100 per month less due to fees, interest etc.

It's worth keeping an eye on. On the LBG banking app if you go to the loans section it will usually say there what they think they can offer you - for ages mine was we wont offer anything, then out of the blue it changed and they could.

I know that doesnt help much but worth just keeping an eye on it

I already have 2 loans with them that i've been paying for 2 years. Ive never missed a payment but they point blank refuse to help out in any way. All i can think of doing is opening another basic account with someone, having my money paid into there and asking lloyds to freeze the account and let me pay them a set amount each month for the loans and OD.

I have a £3k planned overdaft with Lloyds and just worked out their charges equate to over 52%pa uncompounded! does anyone have an idea what Lloyds attitude is to changing this to a personal loan - I too don't think I will get an overdarft elsewhere just now!

I have what was an agreed Lloyds Current Account overdraft of £7000 and yes its on the high side and has remained that way for many years following a redundancy.

The new charges mean that instead of me paying £90 per month as I was up until Summer 2017, I now pay over £280 per month. That an increase of £2300 in charges per year totalling over £3400 per annum.

Does anyone have any information on whether my situation is actually lawful or not and whether it is worth taking to the ombudsman? I would guess a bank switch is unlikely to be accepted.

Feeling particularly aggrieved as I have only ever banked with Lloyds and have done for 40+ years.

I'd appreciate anyone's help or comment.

Thank you.

get out of there

open a parachute account and get your income paid into that.

its YOUR MONEY take control

get out of there

open a parachute account and get your income paid into that.

its YOUR MONEY take control

I appreciate your advice and will look into that as an option. Many thanks.