Halifax to reduce overdrawn account charges

Halifax is set to become the latest bank to reduce the fees it charges customers who go overdrawn without permission, it emerged today.

The group is reducing its charges from £35 for each payment made while the customer is in the red without arranging an overdraft, to £5 per day, with fees for people who agree an overdraft starting at just £1 day.

It said the move was part of its plan to bring overdraft charges on all of its current accounts, except its student account, in line with those on its Reward Current Account, which was launched in February.

But a number of the major banks have changed their charging structure for unauthorised overdrafts since a High Court test case on the issue was jointly launched by the Office of Fair Trading and seven major banks and a building society.

Halifax, which is part of Lloyds Banking Group, currently charges a monthly fee of £28 to customers who go overdrawn without permission or who breach their agreed overdraft limit.

People also have to pay an additional £35 for every payment they attempt to make from the account once they are in unauthorised overdraft, regardless of whether or not it is successful, up to a maximum of three per day.

But from December 6, the bank will be replacing these fees and the interest charged on overdrafts with a single fee that will be charged for each day a customer is overdrawn.

People with authorised overdrafts will pay £1 per day for borrowing up to £2,500, or £2 a day on sums above this amount.

Those who go into unauthorised overdraft will be charged £5 a day, irrespective of how deep into the red they have gone.

Halifax said it would begin writing to customers setting out the changes in October.

Mike Regnier, director of current accounts at Halifax, said: "We have opened over 500,000 Reward Current Accounts since its launch in February 2009.

"Customers find the daily overdraft charging structure clear and easy to understand. We believe the introduction of this charging structure is the right thing for our current account customers."

Earlier this month Royal Bank of Scotland, which also offers current accounts under its NatWest brand, announced it was slashing fees for returning bounced cheques and standing orders from £38 to £5, while fees for paying for goods while overdrawn have been halved from £30 to £15.

RBS has also cut its monthly maintenance charges for unauthorised overdrafts from £28 to £20, with guaranteed card payment fees down from £35 to £15.

The unauthorised overdrafts test case is currently being heard by the House of Lords after the banks involved appealed against the High Court and Court of Appeal decisions that the charges did come under the scope of the OFT.

If the Lords find against the banks it will pave the way for a further hearing to decide whether the charges are fair and, if not, what a fair charge would be.

Banks have so far paid out £559m in refunds to customers who have reclaimed the fees, while nearly one million claims have been frozen while the test case takes place.