Lloyds TSB stings foreign student £660 for being £60 overdrawn

Lloyds TSB stings foreign student £660 for being £60 overdrawn

Lloyds TSB has hit a 19-year-old foreign student with bank charges of £660 after he went £58.61 overdrawn, re-igniting the controversy of "greedy" bank charges just days before the Office of Fair Trading is due back in court to continue its legal battle against the big banks.

The fees, imposed on Bayar Lkhagvajav, a Mongolian studying English at a London college, are close to an entire year's average income in his home country.

Lkhagvajav came to London last September from Mongolia to improve his English. He needed a bank account for the money his parents were due to send him to cover college fees and living expenses. But the money coming in is now paying bank penalty charges instead.

As a result, he spent part of this year sleeping on friends' sofas and scrounging food wherever he could.

When he arrived in the UK, he could only speak basic English. His college suggested opening an account at Lloyds TSB in Kings Cross, London.

He admits, in a written statement to Guardian Money, that he was naive, signing an agreement "in good faith, without understanding the documentation fully, but believing what I was given to be in my best interest".

Lloyds TSB said he was with friends, one of whom had good English and appeared to interpret for him when the account was opened.

He first became overdrawn last November - to the tune of £1.86. Although he had paid in nearly £500 three days previously, it arrived in.....continued below

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his account 24 hours too late due to the long clearing process. For being £1.68 in the red for one day, he was charged £21 in January.

In November, the bank says it introduced "tools to help our customers take control of their cash and avoid overdraft fees altogether. All customers who accidentally slip into the red or go over their overdraft limit will be given a grace period in which to put things right. Provided they contact the bank and make arrangements to correct things before 3.30pm that afternoon they will not incur any charges".

But Lkhagvajav was unaware of this clause. He also admits he was careless from time to time, including allowing a friend to borrow money from his account with his debit card.

"I now know this was wrong, but I thought that he could not take out more than I had [in the account]," he says.

But part of the reason for his overdraft is that Lloyds TSB was charging him £7.95 a month for a "silver account" for a range of services he could not use. This packaged account gave European Travel Insurance (which he could not use due to visa restrictions), mobile phone insurance (he had no phone), car breakdown cover (no car) and other services inappropriate for his needs. The bank has since repaid the silver account fees.

When his account went £58 overdrawn, the bank wrote to him, but he had changed his address. It was not until three months later that he caught up with his mail.

During those four charging periods, a time when the account was not used, the bank hit him with £165 a month in charges. This was calculated at £15 per month plus £15 for each day overdrawn, with a maximum 10 charging days a month.

UK based students are given large free overdrafts - Lloyds TSB offers up to £1,500 - but he did not qualify for a student account as he had not been in the UK for three years. The bank did not offer him a "buffer zone" or an agreed overdraft.