Can a Bank take Housing Benefit to Pay an Overdraft?

No - your bank can not take any benefits to pay an overdraft

Banks are not allowed to use Housing Benefit or any other income related benefits to repay an overdraft.  The law provides that a customer needs a minimum amount of money to live on.  This is called First Right of Appropriation.

If the Bank do use this money towards paying off an overdraft, the customer should be advised to seek legal advice or contact CAB for further help and claim back any charges.

Even if an account is overdrawn, a customer can choose how any further money paid into the account is used (for example to pay rent) using this 'first right of appropriation'.  However, a customer would need to contact their bank with new instructions each time they make a deposit.