Nationwide to refund hundreds of thousands of customers after it broke overdraft rules

12 August 2019

Over 300,000 customers could each get £19 on average

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Nationwide Building Society has agreed to refund £6 million to its customers after it failed to send them correct text warnings.

The Competition and Markets Authority (CMA) introduced rules last year which require banks to contact customers with a personal current account a text alert before charging any overdraft fees.

This is to give customers time to take action to avoid any unexpected charges.

The CMA says 320,000 customers were affected and could be in line for a refund.

Nationwide admitted breaking the rules 20 times, with some of the problems dating as far back as February 2018.

Adam Land, CMA senior director for remedies, business and financial analysis, says: “The text alerts we ordered banks to send to customers if they are about to slip into an unarranged overdraft are key to helping them avoid unexpected fees.

"Nationwide failed to do this on numerous occasions and our action makes it clear they must fix this as a matter of urgency. It’s imperative that these problems are sorted out immediately and that they don’t occur again.

“Although we are pleased that Nationwide is going to reimburse customers affected, the CMA needs stronger powers for cases like this which is why we are seeking the ability to impose fines when firms breach our orders.”

New text alerts

Message changes were sent to customers warning them there wasn't enough money in their accounts in 80% of cases. However, they didn't make it clear that customers could face additional charges if there was not enough money in the account.

Customers with a FlexPlus and a FlexDirect account have a £10 buffer on an unarranged overdraft and once they exceed this they are charged £5 for each day they use it.

Nationwide FlexAccount customers pay 18.9% interest if they go over £15 into an unarranged overdraft.

Nationwide says it has now changed the message it sends to customers to comply with the CMA’s rules.

The message originally read: “Please pay in enough cleared funds by 2.30pm so your payments can be sent.”

This has now been changed to: “Please pay in enough cleared funds by 2.30pm so your payments can be sent and to avoid unarranged overdraft fees.”

How much will you be refunded? 

Nationwide says it will be writing to customers to let them know they have been refunded. Each customer will receive £19 on average, which will be paid directly into their account.

A spokesperson from Nationwide says: “The CMA Retail Banking Market Investigation Order 2017 requires firms to send consumers text alerts where they are at risk of incurring unarranged overdraft, paid and unpaid transaction fees, giving them an opportunity to avoid the charges.

“Nationwide has sent over 19 million alerts since the rules were introduced. We have engaged proactively with the CMA to review these incidents, which were first reported to them in 2018 and the wording was corrected in November 2018.

“We have implemented improvements and additional controls to ensure this does not happen again. These controls are currently being reviewed by independent third parties.

“As an organisation that prides itself on service, we apologise for these incidents and any inconvenience caused. We have started the process for refunding members and will ensure no one is left out of pocket."

New overdraft rules

In June, the Financial Conduct Authority announced a number of reforms to overdraft rules.

Banks and building societies will be banned from charging fixed fees for borrowing through an overdraft – bringing an end to fixed daily or monthly charges, and fees for having an overdraft facility.

They will also be stopped from charging higher prices for unarranged overdrafts than for arranged overdrafts.

Under the regulations, banks and building societies will have to:

  • Price overdrafts by a simple annual interest rate.
  • Advertise arranged overdraft prices with an APR to help customers compare them against other products.
  • Issue new guidance to reiterate that refused payment fees should reasonably correspond to the costs of refusing payments.
  • Do more to identify customers who are showing signs of financial strain or are in financial difficulty

The new rules will come into force on 6 April 2020.

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