Questions Of Cash: 'Shameful NatWest turned 87p debt into £400'

Q. Lloyds wrote to me in November, stating it was closing all my accounts. I have been with Lloyds for 12 years, have a overdraft facility, always been in credit and always had £5,000 to £17,000 in savings with them. I called the closure unit who said they were within their rights and did not have to provide a reason. I have spoken to several Lloyds' managers, who said they could not intervene.

One manager said the bank tried to contact me in October regarding a transaction and refund to a company in America. The bank has an old mobile number on file and could not contact me. I can no longer make transfers or withdrawals online, or in the branch, only make payments on my debit card. I don't mind Lloyds closing the account, but when I applied to another bank for an account this was refused and the branch manager suggested there might be an allegation of fraud. BM, London.

A. Lloyds closed all your accounts shortly after you contacted us. Initially the bank said: "Following a routine review of [the reader's] accounts we took the decision to close his accounts. We regret that we were unable to contact [the reader] by telephone before making this decision, although we did confirm this in writing."

Lloyds then agreed to review its decision. But that review merely approved the original decision, which it has now confirmed in writing. Lloyds refuses to provide an explanation of its decision, quoting legal grounds, beyond saying that you allegedly "breached the terms and conditions by which we offered him banking facilities". You report that the bank has told you that it is concerned with a high turnover in your accounts in recent months.

The positive news is that Lloyds has not made any negative entries to your credit files. On our advice you checked your credit reference files with Experian, Equifax and Call Credit, none of which are showing any adverse entries. So we can see no reason why you should be unable to open an account now with another bank.

Q. I inherited a NatWest account when my mum died when I was 21, leaving me legal guardian of my little brother in 2001. The account was kept open to receive child support payments and was not used as a main account. A mix-up occurred when we changed address in August 2003 and the statements went to my old address. In November 2003, I used the account for the last time to pay for parking, which put the account 87p into debt. I was unaware of this because the statements went to my old address.

I thought the account held a small credit balance and forgot about it until 2005, when Regal Credit Consultants contacted me at my new address stating that I owed money. I immediately investigated and realising my mistake, paid a debt of over £400 – £325 to NatWest debt and the rest for Regal's costs.

I paid to avoid bailiffs coming and also requested six years of statements from NatWest. I found that NatWest had imposed charges of £324.64 on a debt of 87p and added a "default" to my credit file. I have asked NatWest to reconsider my case, but it said it was waiting for the outcome of the review of banks' charging policies and was unable to help. AM, Leeds.

A. We also had to wait until the outcome of the legal case between the banks and the Office of Fair Trading before we could get a final decision from NatWest. Unfortunately the decision of the court in favour of the banks gave NatWest the justification to confirm its previous decision.

NatWest says that if you have a complaint outside the question of the "lawfulness" of the charges it is happy to discuss this with you. But not everything that is lawful is either fair or proportionate. NatWest is apparently unwilling to consider fairness or proportionately and is satisfied with its charging policy. We agree with you that the charges you paid were excessive.

Despite the victory of the banks in the legal dispute with the OFT, there remain avenues for pursuing your case further. Where charges can be argued to be disproportionate, the Financial Ombudsman is willing to consider these – though there is as yet no clear indication of whether he will uphold cases such as yours. For what it is worth, our view is that your charges are not merely disproportionate, but outrageous and it is shameful that NatWest is unwilling to make a substantial repayment.

Q. I have had an endowment policy with Friends Provident since 1987, sadly sold just before the cut-off for claiming for mis-selling. It was originally to pay off my mortgage. In 2007, owing to the appalling performance of the funds I ceased paying premiums, but made clear that the investment was to continue its full 25-year term up to 2012. Friends Provident has now lapsed the policy, thereby devaluing my investment and removing any opportunity for the bonus that would be paid at the end of the full term. JB, Ipswich.

A It is in fact possible to complain about a mis-selling complaint prior to 1987, but the criteria prior to that time is more challenging, with a risk of the complaint now being time barred. Friends Provident says that you previously lodged a mis-selling complaint, but were referred to the financial adviser who sold the policy. Friends Provident says it is also unable to assist on your complaint about it having lapsed your policy.

It states it was unable to allow the endowment to be treated as paid-up while continuing for the full term without you providing written authority. According to Friends Provident you failed to respond to its letters requesting this written authority. Without that, it was legally obliged to treat the policy as lapsed. You were paid the value of the policy as of the date it was deemed to have been closed.

Questions of Cash cannot give individual advice. But if you have a financial dilemma, we'll do our best to help. Please email us at: questionsofcash@independent.co.uk