Banks pay £47m in overdraft refunds after CMA action
The Competition and Markets Authority (CMA) took action against five of the UK’s biggest banks and building societies for breaching Part 6 of the Retail Banking Market Investigation Order 2017.
This order required that customers with current accounts must receive a text alert warning of fees before banks charge them for an unarranged overdraft. Receiving this alert is designed to give people time to take action and avoid any unexpected charges.
The CMA started enforcing the order in 2018 and found that a number of high street banks including HSBC and Nationwide had failed to send the texts as required.
The total of £47m it has secured in refunds includes new refund amounts from Royal Bank of Scotland (RBS) and Santander.
RBS failed to send accurate text warnings to 36,000 customers between February 2018 and December 2019. It has now agreed to fully repay the charges – as well as providing an additional 8% in interest – bringing the total it will refund to customers to £2.2m.
Santander has put aside £17m to refund customers for six breaches of the order, announced by the CMA last year. This will impact up to 470,000 customers who will all be refunded in full. This is on top of £2m in refunds by Santander already announced by the CMA in May 2019.
Since 2018, the CMA’s action has also led to refunds for customers from three other banks and building societies of:
- £11m at Metro Bank
- £8m at HSBC
- £7m at Nationwide
The CMA dealt with some of the worst breaches by issuing legally binding directions, which ensured that banks were committed to refunding those affected. In some cases, the banks and building societies also voluntarily offered to pay interest on the charges.
In December 2019, the Financial Conduct Authority introduced reforms to its own overdraft rules, expanding the requirement to send alerts to all overdraft charges. This meant it was no longer necessary for the CMA to retain Part 6 of the Order – the responsibility for this now sits with the FCA.
Andrea Coscelli, CMA chief executive, says: “Text alerts have been absolutely key in helping people to avoid unfair unarranged overdraft charges and, where banks have failed to comply, the CMA has worked to secure millions in refunds for customers.
“While these breaches are disappointing – and may have been preventable had the CMA been able to issue serious financial penalties – our action has put a total of more than £47m back into people’s pockets. With responsibility for enforcing this now sitting with the FCA, the dedicated sector regulator, we’re confident that this will continue.”