LONDON, July 12 (Reuters) - Lloyds Banking Group announced on Wednesday it is overhauling overdraft charges for millions of customers after widespread criticism about the high rates of borrowing.
Britain's biggest current account provider from November will replace several levels of fees plus interest with a daily charge of 1 pence for every 7 pounds ($9.00) customers go into their overdrafts.
"This new approach is simple and clear, giving customers more control of their overdraft borrowing and how they manage their finances," said Vim Maru, group director of customer products at Lloyds.
The Competition and Markets Authority said last year that the amount banks can charge for unarranged overdraft fees should be capped after finding lenders were making about 1.2 billion pounds a year from the service.
The consumer group Which? has calculated that overdraft fees can be almost eight times more than the cost of payday loans.
Mark Somers, the chief operating officer at the consultancy 4most, said the move is likely to put pressure on rival banks to follow suit.
But he said banks are still charging customers an effective annual interest rate of about 68 percent.
"The interest charges on unauthorised overdrafts are still high," Somers said. He said the way the changes are being presented "is misleading, as it implies to customers that this is 'cheap money'." (Reporting By Andrew MacAskill, editing by David Evans)