February 28, 2007

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  NEWS: Lloyd's to Apply Fee to ‘Low Usage' Accounts

  Lloyd's TSB announced a controversial move last week to charge a £35 fee to those credit card customers that "display low usage." Lloyd's has refused to clarify what, exactly qualifies "low usage," but has said that the fee will impact only 1% of its customers. As Lloyd's holds a 7.3% market share of the UK's credit card customers, the move is expected to impact about 51,000 consumers and generate £1.73 million in income next month alone – a huge boon to the bank.

  
  Unsurprisingly, however, critics are up in arms. The new fee represents an at-least partial end to fee-free credit card usage, as a penalty to those consumers that may hold active accounts, but not use them much. The fee is designed to encourage these customers to use their accounts or close them – obviously, Lloyd's is hoping for the former of the two options to win out. Moreover, consumers now have reasons to fear that Lloyd's will have opened the floodgates for other banks to implement more fees – much like Morgan Stanley's recent move to jack up an out-of-country fee. Banks are reacting to the OFT's mandoatory reduction of card penalties by creating new fees for practically anything they can think of – Lloyd's setting precedent in this issue creates just one more. As it is, without defining "low usage," the bank has put itself in the position of being able to penalize those customers who do not spend enough money. Other banks have implemented fines for those carrying a balance from month to month; yet other have set fees designed to impact those who pay off their card balances in full from month to month. It stands to reason that UK consumers would be concerned about what's coming next.
  
  
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