Nationwide Building Society (LON:NBS) has been ordered to pay back £900,000 to its customers after failing to notify them of charges on unarranged overdrafts.
The company said that it sent text alerts, however the message somehow didn’t contain the necessary information to warn customers that they would be charged.
According to the Competition and Markets Authority, some 70,000 people were affected by the company’s negligence, with these individuals already known to Nationwide as having difficulties managing their accounts.
The CMA doesn’t have the power to impose a fine, though the refunds paid by the Group will reimburse the full extent of charges incurred by companies entering into unauthorised overdrafts.
Under CMA rules, customers with personal current accounts must receive text alerts before a company imposes unarranged overdraft charges. This allows consumers to take the necessary steps to avoid unexpected fees.
Today’s announcement is just the newest wrongdoing by big financial players, in what seems to be a losing battle to rekindle consumer trust in the banking sector.
It marks the second time Nationwide has breached this same banking order within the last six months, with it being told to refund £6 million to customers in August.
This was somewhat overshadowed by the traction gained by the wrapping up of PPI repayments by big players such as Lloyds (LON:LLOY) during 2019. The situation of consumer confidence in banks will likely worsen before it improves, with the EU saying it will exclude the UK from the MiFIT II regulatory framework.
Adam Land, senior director of remedies, business and financial analysis at the CMA, said: “Banks and building societies that fail to send customers text alerts saying they will be charged if they enter an unarranged overdraft are breaking the rules. The fact that Nationwide is a repeat offender makes it even more serious.
“Following our action, it will now repay all affected customers, and quickly.”
“This issue will not occur again”
The CMA saidt Nationwide has appointed an independent auditor to review its processes.
Sara Bennison, chief marketing officer at Nationwide, said: “The CMA Directions, issued to Nationwide in August 2019, required the Society to complete an independent review of its processes in relation to text alerts. While all members received their texts on each and every occasion, this review identified that alerts sent to members who were in Collections did not explicitly state that they would be charged an unarranged overdraft fee.
“While these members haven’t been overcharged, we appreciate these texts are designed to help people avoid unarranged overdraft charges, so we apologise that on this occasion we didn’t meet the high standards we set ourselves. We are contacting impacted members and will be automatically refunding the charges back into their account.
“From 11 November 2019, the Society removed unarranged overdraft charges, so this issue will not occur again in the future.”
The Company’s share price stands at 164.00p per share.