Bank charges student £800 for going EIGHT PENCE overdrawn

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A student has been threatened with legal action by her bank after racking up £800 in charges on a debt which began as an 8p overdraft.

Laura Gibson, 20, was stung by charges of up to £166 a month after going into the red last September.

Despite paying back £300 she has been unable to keep ahead of the spiralling fees and now owes £515.18.

Miss Gibson, of Cheltenham, said: 'This whole episode has been an absolute nightmare.

'For a debt to have gone from 8p to more than £500 is crazy.'

Her ordeal began when a £60 purchase on her Switch card sent her Lloyds TSB Classic Plus account 8p into deficit.

The account has no overdraft facility so she was charged £60 for going overdrawn. She was unable to pay the full penalty and it rose by £30 in October, £60 in December and £78 in January.

By March, she had racked up more than £300 in overdraft fees, which she had nearly paid off by April.

But in May, Lloyds TSB increased its overdraft charges to a flat monthly rate of £166.55. This sent the debt soaring again and Miss Gibson, who is studying A Levels at Gloucestershire College, is now £515.18 overdrawn after ten months.

Lloyds TSB has offered to waive half the fee if she repays £250 immediately, but Miss Gibson, who was raised in social care and has no family to provide financial support, cannot afford this.

The bank has now warned her of legal action if she fails to settle.

A spokesman for Lloyds TSB said: 'The charges that Miss Gibson has incurred are not for a one-off unplanned overdraft position of 8p, they relate to an unplanned overdraft of varying amounts dating back to September 2007.

'In situations where there are extenuating circumstances, such as illness, which may affect a customer's ability to manage their finances, we can consider waiving part or all of the charges incurred.

'In the light of new information that Miss Gibson did not share with us when she contacted us to discuss her finances, we will be contacting her again to discuss her circumstances.'