In response to new regulations from the Financial Conduct Authority (FCA) regarding overdraft charges, Lloyds Banking Group has raised overdraft interest rates for customers by up to 49.9 percent.

New Regulations Result in High-Interest Rates

Lloyds, Halifax, and Bank of Scotland are all owned by Lloyds Banking Group, which announced that the three banks will be implementing a “risk pricing” structure for overdraft interest rates. According to Yahoo Finance, most of the bank’s 2 million customers will pay about 40 percent, but some will be charged nearly 50 percent. The banking group says that under the new structure, 90 percent of its customers will pay the lower overdraft charges, however, it’s likely that the customers who will pay more are those with a poor credit history.

Although other banks also recently announced overdraft interest rates, Lloyds Banking Group’s rate is the highest. In response to the updated rates, the FCA has sent letters to several banks asking for an explanation about the steep rates.

The Guardian reported last year that in order to correct what it called a dysfunctional market, the FCA banned predatory overdraft charges in the UK.  Under the new regulations, banks must charge annual interest rates for overdrafts instead of daily or monthly fees. The previous regulations allowed banks to charge higher fees for unarranged overdrafts. In 2016, more than half of unarranged overdraft fees came from 1.5 percent of customers. The new regulations will take effect in April.

The new rules are meant to eliminate confusing overdraft policies and correct a system that was disproportionately affecting vulnerable consumers. However, although the FCA instituted the change in regulations, BBC News reports that the regulator has asked several banks to explain the choice to respond to the new rules by setting interest rates at an average of 40 percent.

In addition, the FCA also indicated that banks are expected to help customers who may be experiencing financial difficulties due to the policy change. The organization suggested waived or reduced fees for consumers who are worse off due to the new rules, or the offer of a repayment program.

About Overdraft Charges and Fees

Overdraft charges are fees that are assessed against a customer’s account when they attempt to make a transaction without having enough money in their account. When this occurs, the bank will often cover the transaction by essentially giving the customer a loan to cover the cost of the purchase, but will also charge the customer an overdraft fee. Generally, these fees range between $25 and $40. However, some customers claim that these fees are assessed multiple times for the same transaction. Additionally, customer reports indicate that some banks and financial institutions may make it difficult or confusing for customers to determine a bank’s fee policies.

If you believe you have been assessed inappropriate or predatory overdraft fees by your bank, you may be eligible to hire a qualified attorney. An attorney may be able to review your case and determine whether you qualify to file a class action lawsuit against your bank.

If you were charged overdraft fees or NSF fees by your bank or credit union that you believe are improper for any reason, the attorneys who work with Top Class Actions are ready to investigate these fees on your behalf.

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This article is not legal advice. It is presented
for informational purposes only.