The Competition and Markets Authority (CMA) has secured refunds of up to £47 million from some of Britain’s largest banks after they failed to inform customers of hidden overdraft charges.
The regulator took action against the banks for breaching part six of Retail Banking Market Investigation Order 2017, which states that customers with personal current accounts must receive an alert of fees before the banks charge them for an unarranged overdraft.
In the last two years, the CMA has enforced the order and collected nearly £50 million in refunds from a host of high street banks, including RBS and HSBC.
Between February 2018 and December 2019, the CMA found that RBS failed to send accurate text warnings to around 36,000 customers. The bank has now agreed to fully repay the charges, as well as providing an additional 8% interest, which brings its refunded total to £2.2 million.
In a letter to the bank, the CMA said that in addition to not sending text warnings to customers it “failed to enrol adult personal current accounts (PCAs) which were previously youth accounts into the Programme of Alerts within 10 working days as required by the Order”.
It was subsequently revealed that this affected around 179,000 RBS customers.
The CMA’s action has also led to refunds for customers from three other banks and building societies, including:
- £11 million for current account holders at Metro Bank
- £8 million for current account holders at HSBC
- £7 million for current account holders at Nationwide
Andrea Coscelli, Chief Executive of the CMA, said: “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 £47 million 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.”
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The CMA dealt with the worst breaches of the Order by issuing legally binding directions to banks, which ensures that banks remain committed to refunding affected customers.