Bank Problem and Bad Credit

I find myself in a slightly difficult position, about seventeen months ago out of the blue I had a relation arrive in the UK who was on a sort of backpacking holiday from down under. They stayed with us for about three weeks and then went off travelling around the UK before heading back abroad. Whist they were here they managed to open a bank account with Lloyds Bank and even more amazing got access to a £700 overdraft straight off.

Anyway unbeknown to us they gave our home address to Lloyds as a contact address and after three months had passed and this relation had long departed these shores bank statements started arriving which surprised us. We contacted this relation who had by this time gone back down under and they said they would attend to matters. Longstory cut short the statements kept arriving and we contacted the bank ourselves and although they would not discuss the account details due to DPA they said that they would make a note of it and stop sending the statements to us, as we had no forwarding address to give only a email address they asked us to let this person know that they would have to contact them directly.

Fast forward to May 2010 and this account is overdrawn as this relation is still using there overdraft and the bank want payment to settle the outstanding amounts plus all the charges imposed. We have called the bank again and although they were a little sympathetic they have said that our address was given as the main contact address when the account was opened and that legally in the event of defaults it would be our address that would get a County Court Judgement placed on it should the money not be paid in full.

Now from what they have said it seems that anyone can walk into Lloyds open an account and say they live at someone else's property and then the unsuspecting housholders are stuck with this scenario. Lloyds said that in the event of a CCJ that we would have to apply to a court and plead the case.

My view of this is that Lloyds have been grossly negligent in that they failed to credit check this person and even ascertain basic requirments if they were even registered on the electorial role or had any credit history here in this country which if they had would have rang some bells.

Has anyone else had such a problem or knowledge of such as I am not sure what to do as we have a good credit history and this would affect us in many ways which seems unjust and very unfair.