Two years ago Stephen Hone, a Plymouth University law student, phoned his bank after his monthly statement revealed he had been hit with two penalty charges of £32 each.

Surely there had been a mistake, he said. Yes, he had breached his overdraft limit but only by 5p. The penalties were grossly disproportionate and could not possibly reflect the costs incurred by the bank in putting things straight.

The woman on the other end of the line was polite but firm. The Abbey, formerly the Abbey National, had fixed charges for customers who breached their lending limits, she said. It was the same at all Britain’s high street banks. She would consult her manager but did not hold out much hope.

A few minutes later she was back on the line. The Abbey would waive one of the two £32 penalties as a “goodwill gesture”, she said, but he would have to pay the second. “For a moment I thought about it,” Hone said last week. “But I had just started my degree, which included consumer contract law, and I was sure that what they were doing was illegal.”

Hone tried to work out the effective interest rate in his head. Yes, they were offering to cut the penalty in half, but a £32 charge on 5p was still equivalent to being charged interest at a rate of 64,000%. “Look, I want all the money back,” he concluded. “What you’ve done is against the law. Unless you drop both charges I’ll take my case to the county court.”

Dismissive of Hone’s legal threats, the Abbey blithely refused to give him his money back. As the punchline from the comedy series Little Britain has it, it was a classic case of “computer says nawooo”. IN retrospect, it was a huge mistake. Perhaps the most expensive ever made. True to his word, Hone filed his claim against Abbey in Plymouth county court a few weeks after his initial complaint. And if the bank’s executives were initially bullish about winning, the smiles were quickly wiped from their faces when the judge ruled he should be given his money back.

The student, it seemed, had done his homework. British law does not allow banks, or any other company or institution, to hit customers with “unreasonable” charges even if those charges are spelt out in a signed contact. Charges must be proportionate to costs. Any more and it’s profiteering.

The Abbey promptly responded by having the court judgment set aside, claiming it did not know the case was going to be heard. It then appears to have decided to settle as quickly and as quietly as possible.

“In the end they refused to accept liability but offered me £5,000 in compensation,” said Hone last week. “The other banks must be absolutely furious. It was an argument over £32 and it now looks as if it’s going to cost them billions.”

Hone had one more trick up his sleeve – something that every astute consumer should insist on. The Abbey demanded that he sign a confiden-tiality agreement before paying him his compensation. But Hone refused point blank. He would prefer to see the matter formally settled in court than be gagged.

“I just said no, I’m not agreeing to keep quiet,” he said. “The whole point of bringing the case was to show that what they were doing was wrong and I wanted to publicise that.”

And publicise it he did. After the Abbey handed over the money he posted his story on the worldwide web. And like a virus it spread, with consumers across Britain downloading the details of his case before launching their own on the back of it.

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