Lloyds new overdraft rate is designed to deceive

oscarisapc2001

I have just received notice from Lloyds Bank that they are changing their overdraft rate from 19.89% EAR to One Penny per day for every £7 pounds borrowed. That seems pretty good news until you realize that that this smoke and mirrors act is equivalent to an annual interest rate of over 50%. Nowhere on the notice can I see the new EAR which I thought was obligatory when advertising loan rates. Doubling their overdraft rate to over 50% is just plain greedy, especially at this moment in time when families are feeling poorer and many more need overdrafts to keep afloat.
I don't need or want an overdraft so this is not a personal issue but what do others think?
Thanks.

AliceBanned

There is a thread on the Halifax changes (same issue).
https://forums.moneysavingexpert.com/discussion/5693852

PeacefulWaters

Their overall income from overdraft related fees and interest will fall as a result of these changes.

oscarisapc2001

I know there is a thread on Halifax but that is mainly about how borrowers can mitigate the effects. I am just angry at a deception yet again by bankers. Firstly, saying the benefit is that overdrafts will will be "easier" to calculate. Secondly, stating the interest rate in pence per day which disguises a huge annual rate more than double the existing. Thirdly, deliberately avoiding showing a calculation of the AER, even on their "representative example".
Do we as Joe Public just have to suck it up? Lloyds, as far as I recall is still part owned by the taxpayer

jonesMUFCforever

oscarisapc2001 wrote: »

Do we as Joe Public just have to suck it up? Lloyds, as far as I recall is still part owned by the taxpayer

Nope, Lloyds paid all back with more than £500 million on top!

PeacefulWaters

oscarisapc2001 wrote: »

I know there is a thread on Halifax but that is mainly about how borrowers can mitigate the effects.

Mitigate away.

I am just angry at a deception yet again by bankers. Firstly, saying the benefit is that overdrafts will will be "easier" to calculate. Secondly, stating the interest rate in pence per day which disguises a huge annual rate more than double the existing. Thirdly, deliberately avoiding showing a calculation of the AER, even on their "representative example".

They never had to include the monthly fee, charged in addition to interest, as an AER.

Do we as Joe Public just have to suck it up?

No. Mitigate. Adjust the way you borrow.

Lloyds, as far as I recall is still part owned by the taxpayer

All repaid now.

TrustyOven

oscarisapc2001 wrote: »

Doubling their overdraft rate to over 50% is just plain greedy, especially at this moment in time when families are feeling poorer and many more need overdrafts to keep afloat.

I agree that it looks too greedy. It looks worrying.

However...

Why are families feeling poorer especially at this specific time?

I thought unemployment was down, stock market is up, it's the summer, so no expensive heating bills, they are paying into pensions and paying off student loans as time goes on; surely their net worth should be going up as a result?

AliceBanned

oscarisapc2001 wrote: »

I know there is a thread on Halifax but that is mainly about how borrowers can mitigate the effects. I am just angry at a deception yet again by bankers. Firstly, saying the benefit is that overdrafts will will be "easier" to calculate. Secondly, stating the interest rate in pence per day which disguises a huge annual rate more than double the existing. Thirdly, deliberately avoiding showing a calculation of the AER, even on their "representative example".
Do we as Joe Public just have to suck it up? Lloyds, as far as I recall is still part owned by the taxpayer

Well not exactly because the thread is also making the point that the actual cost is not transparent so we worked the APR out ourselves. Basically saying the same thing - it is a bit much and higher than some payday lenders.

oscarisapc2001

As to the matter of monthly fees which cause a lot of confusion.. Under the current system, a £10,000 planned overdraft for three months, fees included, would invoke £476.15 total cost of credit - an equivalent annual simple rate of just over 19%. Under the new regime, it will cost £1304 for three months- an annual rate of just over 53%.
This covert doubling, nearly tripling, of the interest rate on overdrafts disguised as a benefit stinks.
Are you seriously suggesting this is OK?

PeacefulWaters

oscarisapc2001 wrote: »

As to the matter of monthly fees which cause a lot of confusion.. Under the current system, a £10,000 planned overdraft for three months, fees included, would invoke £476.15 total cost of credit - an equivalent annual simple rate of just over 19%. Under the new regime, it will cost £1304 for three months- an annual rate of just over 53%.
This covert doubling, nearly tripling, of the interest rate on overdrafts disguised as a benefit stinks.
Are you seriously suggesting this is OK?

Anybody running an overdraft at that level, or any level, does so knowing it can be called in on demand.

You've got two months to refinance elsewhere. Stamp your feet and get upset or move your borrowing.

AliceBanned

PeacefulWaters wrote: »

Anybody running an overdraft at that level, or any level, does so knowing it can be called in on demand.

You've got two months to refinance elsewhere. Stamp your feet and get upset or move your borrowing.

Hmm very true but those who can't move their borrowing for a while will be put in financial hardship potentially..I think people in this situation are trying to move their borrowing but are also expressing their concern about the impact on those already struggling. I am glad people have posted on here to highlight the true facts and figures.