Lloyds Banking Group has been criticised for introducing new overdraft charges this week, ahead of a proposed crackdown later this year.

The Financial Conduct Authority (FCA) wants to scrap overdraft fees and replace them with a single interest rate.

Rachel Reeves MP, who chairs the Business, Energy and Industrial Strategy select committee, described Lloyds' fees - which will equate to an annual interest charge of up to 61% - as unacceptable, as reported by the BBC.

Lloyds Banking Group, which has a headquarters in Barnwood, said its changes were announced before the FCA's new recommendations.

Rachel Reeves argues that, while not illegal, the charges were not in the spirit of the FCA's recommendations. She said the fees would increase charges for the majority of customers.

The new charges came into effect yesterday (14th January) for Bank of Scotland customers and will start on 28th January for Lloyds Bank and 4th February for Halifax customers.

Rather than paying 1p a day for every £7 of overdraft used, the cost for the first £1,250 borrowed will increase to 1p a day per £6. That works out at an annual interest charge of 61%, much higher than expensive credit cards aimed at people with poor credit records.

It means that anyone borrowing less than £4,100 on their overdraft will pay more.

But the FCA wants banks to charge a single interest rate for all types of overdraft, meaning customers would be able to compare banks for the best deal.

According the FCA, customers in more deprived areas pay on average twice as much in charges for unarranged overdrafts as those living in less deprived areas.