Lloyds said on Wednesday that all customers would be offered a £300 ($356) fee-free overdraft, which will automatically become available from 6 April and last for three months until 6 July. The changes apply to Lloyds Bank and subsidiaries Halifax and Bank of Scotland.
“Being there for our customers when they need us is our priority,” said Vim Maru, retail director at Lloyds Banking Group.
“The introduction of the £300 interest-free overdraft will give our customers some important breathing space at this difficult time.”
The announcement comes hours after Barclays said it was suspending all overdraft fees for a month in response to the Covid-19 pandemic.
The crisis has coincided with planned changes to overdraft charges, which come into force in April. Many banks had announced plans to raise annual interest charges to at or around 40%, leading to criticism around the timing. Lloyds was among those raising rates to that level.
Spending over the £300 limit will still incur fees but Maru said: “We will be implementing changes to our overdraft interest rates in April meaning all customers will pay less for their overdraft than they do today.”
About 2.7 million people are stuck with permanent overdrafts because of low pay and high living costs. FCA data shows that UK banks made £2.4bn ($2.7bn) from overdrafts in 2017.
The pandemic and efforts to contain it have caused huge economic disruption, with a surge in job losses as the economy largely shuts down. The government has called on banks to support customers through these difficult times.
Lloyds said it had approved 70,000 mortgage payment holidays in just the last week and extended mortgage offers for those yet to complete on a purchase. Over 30,000 personal loan customers have also been granted payment holidays. Late payment charges on mortgages, credit cards, motor finance, and loans have also been frozen for three months.
“We know that this is a difficult time and we want to be there by the side of our customers,” Maru said. “The measures we are introducing are all designed to help people through these unprecedented times.”
Stephen Jones, chief executive of industry lobby UK Finance, said in a statement: “The banking and finance sector is working closely with the government and regulators to deliver the support and flexibility businesses and consumers need during this challenging time.”