Lloyds TSB has become the first bank to overhaul its overdraft charges ahead of an Office of Fair Trading test case on punitive current-account fees.

The bank, which has nearly one in five of the UK’s current accounts, is changing its charges when customers slip into the red, or exceed their overdraft limit, by accident.

Lloyds claimed that most customers will pay less for unplanned borrowing under the new system, which takes effect from November 2. Its 11m customers will be receiving letters about the changes from Wednesday.

The move suggests the bank expects the OFT to force institutions to cut their fees following its hearing in January.

From November, all customers who accidentally slip into the red or go over their overdraft limit will be given a grace period in which to top up their accounts before incurring charges. If they contact the bank, they will get until 3.30pm that afternoon to pay in more cash or move money from other accounts.

At the moment, Lloyds charges an ‘overdraft excess fee’ of £30 a day, up to a maximum of three a month, when customers exceed their limit. This will be replaced with an ‘unplanned overdraft charge’ of £15 a month plus daily fees depending on how far you are in the red.

If you have unplanned borrowing of less than £25, the fee is £6 a day, rising to £15 a day between £25 and £100 and £20 thereafter.

The returned item fee, charged when a cheque, standing order or direct debit is bounced, is being reduced from £35 to £20 with a maximum of three a day.

Lloyds said the vast majority if its customers slip into the red without permission by only small amounts and will therefore be better off under the new system, but it admitted that people who have bigger unplanned debts could be worse off.

It is also cutting the interest rate on unplanned borrowing to the same level as on authorised overdrafts. The exact rate depends on which account you have, but Classic customers will see their rate chopped from 29.8% to 19.3%.

Customers will also be offered a text alert service, which will warn them when their balance is within £50 of its limit, and then again when a payment can’t be made because they have breached the threshold.

This service will be free until the end of the year, but, in a sign that free banking may be doomed, it will then cost £30 a year for each account.

Ian Larkin, managing director of consumer banking, said: “We want to help our customers avoid accidentally slipping into the red and are giving them the tools to do just that. We understand that it can sometimes be difficult for customers to keep tabs on their account and we want to make it easier.

“Our new text messaging service, which alerts people when they are getting near their limit, puts customers firmly in the driving seat. Customers who do accidentally go over their limit, will be better off as they have the chance to top up their account and get themselves back on track.”