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HSBC and Santander overdraft customers set for refund

Written by: Paloma Kubiak
Tens of thousands of HSBC and Santander customers are set to receive refunds after the banks broke rules surrounding overdraft warnings.

Since February 2018, banks have been legally required to send customers text alerts before charging them for going into an unarranged overdraft, giving them a chance to act and avoid charges.

But HSBC twice breached these rules and will now refund £8m (including interest) to 115,000 customers. Santander broke the rules six times but has yet to confirm the number of customers affected or how much it will refund. It said it’s an “absolute priority to identify customers who have been impacted”.

The refunds paid by the banks cover all fees incurred by customers from going into unarranged overdrafts where they had not been warned beforehand by the required text alerts.

Santander added that where customer credit files have been impacted, “it will take necessary action to correct it”. HSBC said there shouldn’t be a credit score issue for these customers.

How did the banks breach the rules?

In the first breach, HSBC’s ‘unsociable hours’ policy to reduce disturbance to customers meant no contact between 10.45pm and 7.30am during weekdays and between 10.45pm and 10am on weekends and bank holidays. But this resulted in customers only receiving alerts a day after incurring fees for going into an unarranged overdraft.

In the second breach, the Competition and Markets Authority (CMA) found that HSBC stored mobile phone numbers in a format that wasn’t compatible with the text alert system so some customers didn’t receive messages before being charged.

Santander’s breaches were considered a ‘serious matter’ and included failing to add customer mobile numbers to the alert system, sending alerts to customers at the end of the day rather than at the start of business, and error messages being generated which prevented alerts being sent.

In other breaches, Santander was found to store mobile numbers in different telephone fields so messages weren’t sent, failed to send alerts earlier in the day due to high volumes of overnight batch payment processing and failed to provide an alert where the amount authorised and withheld exactly matched the value of a single direct debit amount being processed.

Following the failings, the CMA has also ordered the banks to undertake an independent review of their compliance with the rules.

What do the banks say?

An HSBC UK spokesperson, said: “Having been the first bank to auto-enrol customers to unarranged overdraft SMS alerts, and seeing that six in ten of our customers who receive one then pay in money avoiding additional charges, we appreciate how helpful these text messages can be.

“We apologise to those customers who for different reasons did not receive an alert. We will continue contacting customers who incurred overdraft charges as a result of these issues to apologise and provide a refund.”

A Santander spokesperson, said: “We are very sorry that some customers in certain circumstances were not sent the required overdraft alerts. The introduction of these alerts is a move we welcomed and believe is a real support to customers.

“We have carried out a detailed review to understand why the errors happened and have taken steps to fix the issues.  We are now working to identify and refund all affected customers as quickly as possible.”

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