Page last updated at 15:35 GMT, Saturday, 31 October 2009

HBOS to alter overdraft changes

By Bob Howard
Reporter, Radio 4's Money Box

HBOS logo
HBOS is changing its overdraft charges

Radio 4's Money Box has learned that Halifax Bank of Scotland will make a small concession on new charges for authorised overdrafts.

Customers were due to be charged £1 a day if they went even 1p into the red, from 6 December.

HBOS has now said it will offer a buffer zone to allow customers to go overdrawn by up to £10 a month without being charged the daily fee.

The change from charging interest to a flat-rate fee has angered customers.

Buffer zone

An HBOS spokesperson said: "We will be giving customers with arranged overdrafts a £10 buffer zone to help those who slip into the red by a small amount.

"This is a way of helping customers manage their money rather than something they should rely on at all times."

Radio 4's Money Box programme has calculated that anyone with an overdraft below £1872 is going to be worse off as a result of the introduction of fixed fees.

When they threaten to change their bank, the bank will start to offer concessions
Martin Hocking, editor of Which?

The move will affect all customers with an overdraft facility on their account except students.

At the moment customers pay a daily interest charge on their current account overdrafts.

The change will mean anyone with an authorized overdraft up to and including £2500 will pay £1 a day in overdraft fees. Those with overdrafts over £2500 will pay £2 a day.

Customers like Vikki Baker from Colchester will feel no benefit from the new buffer. She is up to her overdraft limit and with no job cannot repay the money she owes as she told Radio 4's Month Box programme:

"I will now be charged £31 a month instead of the £10-£15 interest I was being charged before. This will take me over my arranged limit, and it will end up costing £150 a month. I cannot afford this. What am I supposed to do?

Halifax customer Vikki Baker
Halifax customer Vickki Baker will not be helped by the new buffer

Customers must act

Martyn Hocking, editor of Which? magazine, said although the introduction of a buffer zone was a move in the right direction, customers had to demand much more:

"It's a small concession. More importantly it goes to show when customers act, when they threaten to change their bank, the bank will start to offer concessions."

This buffer zone could grow to £50 next week, £100 the week after, if customers continue to vote with their feet"

HBOS said those customers who would not be helped by the buffer zone had other possible solutions: "For those customers who use their overdraft on a more regular basis, and those that are near their agreed overdraft limit, we encourage them to contact us so that we can discuss their circumstances and see how we can help."

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