LLOYDS TSB

Many Lloyds TSB customers are being hit with charges of up £200 a month if they go into the red, while Muslims who use the bank are only being charged £15. The part-nationalised bank has been accused of religious discrimination over the disparity between overdraft charges on its standard current account and its Islamic account. The Islamic account was set up to attract Muslim customers by allowing them to keep faithful to their religion. Sharia law does not permit the payment of interest so the 'typical' Islamic account at Lloyds TSB has been set up without an overdraft facility.

If a Muslim customer who has insufficient funds in the account tries to make a payment, it is blocked and a 'return item fee' is charged. However, on some Islamic accounts such a payment is authorised and an 'unplanned overdraft fee' of £15 is then levied. The bank says this is a management fee, not a payment of interest, so does not contradict Sharia law. Meanwhile, customers with standard current accounts who go into the red by at least £100 without authorisation are hit with an 'unplanned overdraft fee' of £20 a day for a maximum of ten days. This could mean a customer has to pay £200 in one month.

The Islamic account is available to all customers at Lloyds TSB. In theory, anyone who does not need a permanent overdraft facility could switch to this account to avoid being hit by interest charges for going into the red. The disparity between the two accounts emerged after the bank sent its customers a booklet this month explaining its charges. Graham Milne, a customer and chartered accountant from Norham, Northumberland, said difference in fees was tantamount to 'religious discrimination'.

He added, "This means that all the non-Islamic account holders are subsidising those with such an account. It strikes me as something which is bordering on illegal. One cannot help feeling the organisation is bending over backwards to help Muslims to the detriment of everybody else. The man in the street would say this is a form of theft. Whether you call it a management fee or an interest fee, it makes no odds because they mean the same thing."

A Lloyds TSB spokesman said, "The Islamic current account is for customers who cannot receive credit or debit interest due to their religious beliefs. All of our Islamic accounts comply with Islamic law and are available to anyone regardless of background or faith. These accounts are structured differently to our traditional accounts and are designed to help prevent a customer slipping into the red. A comparison with the overdraft charging structure on other accounts is meaningless." (Source: Daily Mail, Aug/09)

The chief executive of Lloyds TSB, one of the banks being bailed out by a £37bn Government rescue package, promised staff they will receive bonuses this year. Eric Daniels told employees that the historic Government intervention would not restrict the lucrative payouts. He claimed the bank's staff have done a 'terrific job this year' and 'there is no reason why we shouldn't' get bonuses. When Gordon Brown made the decision to invest billions of taxpayers money to prop up some of Britain's major banks, he promised to end the culture of 'rewards for failure'.

He pledged that the directors at the banks which were taking part in the bail-out scheme would not receive cash bonuses this year. However, although Lloyds TSB will receive £5.5bn of taxpayers funds, Mr Daniels said that the move placed 'very, very few restrictions' on the bank's behaviour. He said, "If you think about it, the first restriction was not to pay bonuses. Well Lloyds TSB is in fact going to pay bonuses." (Source: Daily Mail, Oct/08)

Lloyds TSB has become the first bank to win a court case after being sued by a customer for imposing supposedly unfair overdraft penalty charges. District Judge Cooke, at Birmingham County Court, dismissed a claim for £2,545 from Kevin Berwick. Mr Berwick argued Lloyds TSB's charges for having an unauthorised overdraft were illegal contractual penalties but Judge Cooke decided the bank's charges were in fact legitimate fees for servicing an overdrawn account.

As this judgment has come from a district judge, it is not binding on any other court, in the way that a High Court judgment might be. Marc Gander, of the Consumer Action Group, a leading bank charges campaign, said, "We feel the judge has not considered the fact that disguising penalties as a fee for a service is a very common device for circumventing established law. The judge appears not to have looked behind the words on the contractual document." (Source: BBC News, May/07)

Lloyds TSB is taking away a £10 buffer zone which stops customers incurring charges should they slip into the red by just a couple of pounds. Now those who go overdrawn without permisssion for as little as 24 hours will be hit with a £30 charge. Any further transactions they make will incur a further £30 fee or £35 if a cheque or direct debit is bounced. The bank will no longer waive fees for customers going overdrawn for the first time in 12 months.

And in a move that further signals banks' desire to kill off free-banking by stealth, Lloyds announced that customers in its paid-for Platinum and Premier accounts would get preferential treatment. These customers, who pay up to £300 a year for their account, will still be able to use the £10 buffer zone.

The Office of Fair Trading launched an investigation into charges which can be up to £39 when account holders bust their overdraft limit or have a cheque or direct debit bounced. It followed a successful assault on penalty charges on credit cards which resulted in banks being forced to drop their fees from around £25 to £12. The OFT warned banks that they would be expected to do the same thing for charges on current accounts, but they failed to change. (Source: Mail on Sunday, Sep/06)

Lloyds TSB is forcing customers to sign a gagging agreement that means they must keep secret any claims they make relating to goods bought using their credit card. According to the Consumer Credit Act, if you use a credit card to buy goods that are faulty, or if they are stolen, or the company goes bust before delivery, you are entitled to claim a refund from your card provider. However, when Lloyds TSB card holders make a claim they are sent a form that includes a confidentiality clause in the terms and conditions. Refusal to agree to those terms, means the claim will not be accepted.

Mike Naylor at the Consumers' Association says, "I can’t see any reason for this unless it is to prevent people from knowing when claims are rejected or because they don’t want people to know others are making successful claims. It certainly doesn’t smack of clarity at a time when the credit card industry and its practices are under greater scrutiny." One rival bank accused Lloyds of trying to keep customers in the dark about their right to claim.

Lloyds, which recently announced annual profits up 66% at £4.35 billion, almost £12 million a day, has made no secret of its hostility to Section 75 of the Consumer Credit Act, which protects credit card users. It is disputing with the Office of Fair Trading (OFT) whether Section 75 covers goods bought abroad. However, this is not the first time credit card companies have been accused of trying to wriggle out of their legal obligation to refund customers swindled in card transactions by dubious businesses.

The OFT has accused providers of being obstructive in the hope that customers will give up and go away. Yet Lloyds appears to be alone in forcing customers to sign a confidentiality agreement. Yet the bank defends its stance. It says, "All claimants must sign the confidentiality clause, not just those claiming under Section 75. Although we treat every case on an individual basis, it is particularly relevant if we are trying to sort out a claim but can’t get hold of the merchant."

If you do want to claim you must contact the credit card company. Most will expect you to have tried to sort out the problem with the supplier first. However, don’t be put off. Card providers have a legal duty to give a refund to customers who have been swindled in card transactions. Be aware you can only make a claim for goods or services that have cost at least £100 but no more than £30,000. (Source: This is Money)

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