The action group said the ruling would affect the UK's poorest people
A charity has won a legal bid to stop the government clawing back millions of pounds in overpaid benefits.
The Child Poverty Action Group brought the case after 65,000 benefit claimants were warned they could face legal action if they did not pay back cash.
Judges in the Court of Appeal ruled the government had no power to recoup the overpayments unless they were the result of misrepresentation or fraud.
They also ordered benefits officials not to send warning letters in future.
The action group's solicitor, Sarah Clarke, said she was "delighted" the ruling.
"We brought this case because we know that letters sent to vulnerable claimants threatening court action if they do not repay, have caused considerable distress," she added.
The Department for Work and Pensions (DWP) had stopped issuing warning letters, pending the appeal court's decision.
Between March 2006 and February 2007, the government had written to 65,000 claimants who had received too much in benefits, saying it was allowed to ask for the money back.
It argued it had a duty to recover public money paid out in error.
A High Court judge ruled in the department's favour in February this year, when the action group first challenged it legally.
But lawyers for the group, which aims to influence policy to help low-income families, appealed. They claimed the judgement would adversely affect hundreds of thousands of people.
Lord Justice Sedley acknowledged that the DWP's letters sought "not to threaten and not to alarm unduly".
However, he said the impact could be "devastating to a person already living in or close to penury".
In examples quoted in court, the amounts involved £2,055 and £796. However, the judge noted no court action had yet been taken in cases which involved no fraud or misrepresentation.
A DWP spokesman said: "We will be considering today's judgement carefully.
"Where an overpayment has been made due to an error on our part, we have a duty to the taxpayer to ask for the money back.
"However, we do not enforce repayment as we know that many of our customers are in a vulnerable position and it may not be possible for them to do so."
The DWP estimates that in the last financial year about 2% of all national and local government benefits - about £2.7bn - were overpaid due to fraud and mistakes.
The government had previously been criticised for problems with overpayments of its tax credits. More than £6bn has been mistakenly paid since they were introduced in 2003.