Closing a bank account with an overdraft on it

HurdyGurdy

My bank (Lloyds TSB) are currently taking around £200 a month from me in bank charges.

I have been unemployed since November last year, which is why I'm in such a mess.

I have two current accounts, one for day-to-day money and one for my bills. I have a £600 (fully used each month) overdraft on my day-to-day account, and no overdraft on the bills account. The majority of the charges (£150 this month, and looks like a similar amount for next month) are on the bills account.

I have applied for a £100 overdraft on the bills account and was (not surprisingly) refused, on the grounds that as an unemployed person, I cannot afford an overdraft. I'm at a bit of a loss to understand how they expect me on £128 a fortnight JSA, to afford £200+ in bank charges, using their logic.

I have written to them twice asking them to consider refunding part of the charges. I got lumped in with all the OFT bank charge reclaimers and they wouldn't consider my request until that had been completed. They wrote to me and explained why the bank charges cases had been rejected.

I replied to this showing that I had not claimed under the OFT case guidelines, was not asking for all charges for up to six years (which would have run into thousands), had stated in my original letter to them that I accepted that charges were my own fault, and that I usually just shrugged and accepted that they were just something I had to put up with. However, I had also set out mitigating circumstances in my original letter (which I copied to them) and said that as I was now unemployed, I stood no chance of recovering from the present position whereby the bank was taking all of my money to pay charges, leaving me with no money to pay bills, and therefore the circle continues, with me ending up paying charges on charges on charges etc.

Right, that's the background.

I clearly have to do something to get out of this mess, and the only solution I can see is to stop all the direct debits and standing orders from my account, so that I don't go into overdraft (of around £10 each month!) and start accumulating charges. The bank did ring me to ostensibly help me with my finances "as I was getting a lot of bank charges each month", but the only thing they did was to reduce my buildings and household contents insurance by £5 a month (as it was a Lloyds group insurer). When I asked about the bank charges, I was told there was nothing they could do. Ironic, isn't it, that the only help they could offer me was to ensure that one of their companies retained a bit of business.

Anyway - if I close my accounts, is it likely that they will demand an immediate repayment of the overdraft, or would they be willing, do you think, to accept a payment each month to reduce it? Bearing in mind that I only get JSA of £64 something a week, and that is only going to be for the next 12 weeks. After that, I am not entitled to anything at all, as my husband is meant to support me.

cifpower

You will not be able to close an account if there is an outstanding overdraft on it. What you must do is open a basic account away from Lloyds (like NatWest Step or Barclays CashCard) and have your benefits paid into there. This way they can't take them for charges and overdraft fees.

When this is done contact Lloyds and set up a payment plan to repay the debt. You may find contacting Citizen's Advice could help especially in the drafting of letters.