Banks set out `unfair overdraft charges` defence

Several UK banks have formally defended themselves at the High Court against accusations of applying unfair overdraft charges.

Seven banks, including Abbey and HSBC - along with Nationwide building society - have been accused by the Office of Fair Trading of imposing unfair terms in customers contracts, the BBC reports.

Many customers who used their bank accounts as a debt management solution were charged up to £40 a time for going into an unauthorised overdraft. Since the allegations were first brought, the banks involved have refunded about £570 million to 329,000 customers as a "goodwill" gesture.

The test case will take place in the High Court in January.

In its defence, HSBC told the court: "The charges cannot be contrary to the requirement of good faith or unfair provided that the bank deals with the customer fairly and openly at the time of the conclusion of the contract."

In July this year, NatWest customer Tom Brennan unsuccessfully tried to sue the bank over "unfair" overdraft charges.