Nationwide to refund £1m to customers for overdraft fees
● Building society broke retail bank regulations over text alerts
Nationwide Building Society is to repay customers almost £1 million after it broke regulations by failing to send out text alerts properly informing customers that they would be charged for entering an unarranged overdraft.
The building society is to pay back about £900,000 in charges to 70,000 customers after it failed to properly explain that the customer would be charged if they went into an unarranged overdraft and instead focused on urging the customer to contact the bank to discuss the management of their account.
The rules are in breach of the Retail Banking Market Investigation Order 2017. However, from April, new Financial Conduct Authority rules will bar banks from charging customers more for unarranged overdrafts than for arranged ones.
The Competitions and Markets Authority (CMA) has written to Nationwide to clarify the action being taken by the financial institution as a result of the breach.
The letter said: “We welcome Nationwide’s commitment to refund around £900,000 of charges levied on customers who did not receive a compliant alert warning about charges and who went on to receive charges for exceeding a preagreed credit limit.”
It added: “The affected customers were those who were having difficulty managing their accounts and were either flagged at that time as needing to contact Nationwide in the event they went into an unarranged overdraft or had been flagged as such in the recent past. When each customer affected by the breach triggered an alert, the alert sent by Nationwide focused on encouraging the customer to contact Nationwide to discuss their position.
“However, the alert neglected to mention that Nationwide would be charging the customer for entering an unarranged overdraft position and therefore did not comply with the requirements of Part 6 of the order.”
Nationwide is set to refund the majority of the affected customers by 27 March, while all refunds will be concluded by 29 May.
A compliant alert sent to customers must include reference to any charges which may be incurred and, where relevant, inform them of the time they have to take action in order to avoid charges.
The CMA said that Nationwide’s alertsdid not include this required content and were therefore not compliant with the requirements.
Sara Bennison, chief marketing officer of Nationwide Building Society, said: “While these members haven’t been overcharged, we appreciate these texts are designed to help people avoid unarranged overdraft charges, so we apologise that on this occasion we didn’t meet the high standards we set ourselves.
“We are contacting impacted members and will be automatically refunding the charges back into their account.”