Nationwide will return more than £6m to more than 320,000 customers after the Competition and Markets Authority found that the bank had failed to alert the customers before charging them for unarranged overdrafts.
The CMA introduced an order in February last year stating that bank customers with personal current accounts must receive a text alert before the charges can be levied. The order was aimed at giving customers the opportunity to avoid unexpected fees.
“Nationwide failed to do this on numerous occasions and our action today makes it clear they must fix this as a matter of urgency,” said Adam Land, senior director for remedies at the CMA.
The bank admitted contravening the order 20 times, affecting 320,971 customers, according to the authority.
The refund was proposed by Nationwide in a letter to the CMA. The company wrote that it intends to “commence refunds and communications” by November, with the bulk of the refunds made before mid-December.
Mr Land said: “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.”
Nationwide recently announced that from 11 November it will no longer charge fees for unarranged overdrafts but would instead charge 39.9 per cent APR on overdraft borrowing.
The change meant that the majority of Nationwide customers who use their overdrafts will pay more for doing so.
The Financial Conduct Authority (FCA) has banned daily fees on overdrafts, requiring lenders to charge through an annual interest rate instead by April 2020, following years of complaints by consumer groups that customers were being charged excessive fees.
Although an interest rate is clearer than the confusing array of daily charges that banks levy and it can be compared with other types of borrowing, it is not necessarily cheaper, as Nationwide’s move demonstrates.
Nationwide said it had made improvements to its notifications to customers who risk incurring overdraft fees.
“As an organisation that prides itself on service, we apologise for these incidents and any inconvenience caused,” a spokesperson said. “We have started the process for refunding members and will ensure no one is left out of pocket.”
