UK banks face overdraft fine challenge

A landmark decision in a case involving eight of the UK leading banks is due from the High Court.

Law student Stephen Hone is seeking a 'declaration' from judges regarding the lawfulness of bank penalty charges, claiming that charges should cover only the costs incurred by the bank.

The legal challenge concerns Barclays, HSBC, Lloyds TSB, NatWest, Alliance & Leicester, Co-op Bank, Halifax Bank of Scotland and Nationwide, and could mark an end to steep penalty fees for exceeding overdraft limits

Mr Hone, 29, is a member of the anti-charges Bank Action Group. He won a £5,000 settlement from Abbey National over "excessive" charges after he paid £2,000 in fees and charges over a six-year period and has now issued writs to eight other lenders.

The father-of-three from Plymouth, Devon, took his battle to the High Court earlier this month and the banks were given 14 days to respond, justifying the charges.

If the decision goes against the banks, it could mark the end of lucrative penalty fees of up to £38 each and enable bank customers to claim refunds covering up to six years.

However, if Mr Hone loses his High Court case, he could face losing millions if the banks choose to sue him for costs.

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