Is this the end of RIP-OFF FEES for slipping into the RED?

As Lloyds scraps unauthorised overdraft charges...

RIP- OFF fees for accidentally slipping into the red could disappear by the end the year after Britain’s biggest bank scrapped its charges entirely.

In a major overhaul of its current accounts, Lloyds will be getting rid of all fees for so-called unauthorised overdrafts from November.

The changes also apply at Halifax and Bank of Scotland — meaning that four in ten current account holders in Britain will be affected.

It is a boost for those who just about make ends meet because they won’t be penalised if they accidentally overspend one month.

However, changes to fees for so- called planned overdrafts will result in one in ten customers paying more. The biggest losers will be borrowers deep in the red.

Experts expect other banks to scrap fees for accidental borrowing as they announce major changes to terms and conditions. All major banks are writing to customers about fees overhauls after the competition watchdog told firms they must cap charges by August.

It comes after years of campaigning for a crackdown on banks that use crippling overdraft fees to fill their coffers.

Money Mail first raised the alarm in 2006. Last July, consumer group Which? found using an overdraft can still be up to 12and-a-half times more costly than a payday loan. City watchdog the Financial Conduct Authority (FCA) is holding an investigation and will report back shortly.

Nearly half of bank customers use overdrafts, according to the Competition and Markets Authority (CMA), and £6.76 billion is owed.

JUSTIN MOdRAy, founder of advice firm Candid Money, says: ‘Banks have profited from hitting customers with complex and often exorbitant overdraft fees for years, so it’s great to see Lloyds scrapping unauthorised charges.

‘This is a positive move which I hope more banks follow. However, it’ll be important to compare the costs at the end of the year and see if you could save by switching accounts.’

Under current terms and conditions, Lloyds, Halifax and Bank of Scotland customers who make a payment that takes them beyond any ‘ planned’ overdraft they have agreed are hit with a variety of fees.

These include up to £10 a day for going as little as £26 over their limit, interest at 19.89 pc and up to £30 a day for payments that can’t be processed because there isn’t enough money in the account.

From November, there won’t be any charge for failed payments and no interest or daily fee will apply on the balance.

The bank will decide on a caseby- case basis whether to let payments through if a customer has no money left in their account, or hits a planned overdraft limit.

Account-holders with a good history of keeping on top their finances are likely to have these payments approved, Money Mail understands, while others who have struggled in the past are likely to see them blocked.

Either way, the bank will contact them and may offer to extend their planned overdraft.

The fees for planned overdrafts are also being simplified in November. The £6 monthly charge at Lloyds and Bank of Scotland will be scrapped. Customers will then be charged 1p per day for every £7 of planned overdraft that they use. The same fees apply at Halifax. Most customers will be better off, Lloyds says, but admits those with larger debts will pay more. It says customers who use £100 of a planned overdraft for ten days then borrow £50 more, unplanned, for a further two days are currently charged £18 in a Halifax Reward account and £26.43 in a Lloyds Classic account.

Under the new system, they will pay just £1.40. This is 14p a day for the planned overdraft use and nothing for the extra £50.

Andrew Hagger, founder of researchers Moneycomms, calculated that those borrowing four-figure sums will pay more.

For example, a £2,000 overdraft for 12 days currently costs a Club Lloyds customer £17.47 but will rise to £34.29.

The Competition and Markets Authority regulator asked banks to introduce a monthly cap on unauthorised overdrafts after finding that they made £1.2 billion from overdraft slip-ups in 2014.

It is allowing each bank to decide the level of the cap, and they must write to customers to clearly set out the limit. Account-holders will need to check these documents carefully to see whether they will be better or worse off.

From February next year, banks will also have to sign up customers for text message alerts which are sent when they are at risk of becoming overdrawn. The firms must also provide a ‘grace period’ before charges apply.

HSBC, Barclays, RBS and NatWest already do this by default.

NatWest and Royal Bank of Scotland have set a monthly cap of £80 on unarranged overdraft costs from July 24.

However, the daily charge for being overdrawn by more than £10 — and for each payment that is rejected — will rise from £6 to £8.

TSB has set its monthly cap at £80, Santander at £95, Barclays £32, HSBC £80 and Nationwide £50. Lloyds will set a £95 limit until the November changes. Vim Maru, director of customer products and marketing at Lloyds Banking Group, which owns the Halifax and Bank of Scotland brands, says: ‘We are introducing a simple daily fee which means that what customers pay directly links to how much they borrow and for how long.

‘We are removing all charges and fees associated with unplanned overdraft borrowing — this means from November, our customers won’t incur fees when they unexpectedly dip into their overdraft when faced with something they couldn’t always plan for such as a broken-down boiler or car repair.

‘ We are also going to be contacting ten times as many customers with a text message service so that they know if and when they are reaching an overdrawn position.’

The FCA is looking at overdraft charges as part of its review of high-cost short-term credit.

It called for feedback from the industry and consumer groups on whether the market works well enough for customers and will publish it in the next few weeks.

Peter Vicary- Smith, chief executive of consumer group Which?, says: ‘The FCA must now use its review to ensure other banks restrict unarranged overdraft charges to the same level as for arranged overdrafts.’