Nationwide to pay almost £1m to customers hit with overdraft charges

Nationwide Building Society is to repay customers almost a million pounds after it breached regulations by failing to send out text alerts properly informing customers that they would be charged for entering an unarranged overdraft.

Nationwide is to refund 70,000 customers.
Nationwide is to refund 70,000 customers.

The building society is to pay back around £900,000 in charges to 70,000 customers after it failed to properly explain that the customer would be charged if they went into an unarranged overdraft and instead, focused on urging the customer to contact the bank to discuss the management of their account.

From April, new Financial Conduct Authority rules will bar banks from charging customers more for unarranged overdrafts than for arranged ones.

The CMA today wrote to the financial institution to clarify the action being taken by Nationwide as a result of the breach.

The letter said: "The affected customers were those who were having difficulty managing their accounts and were either flagged at that time as needing to contact Nationwide in the event they went into an unarranged overdraft or had been flagged as such in the recent past. When each customer affected by the breach triggered an alert, the alert sent by Nationwide focussed on encouraging the customer to contact Nationwide to discuss their position.

"However, the alert neglected to mention that Nationwide would be charging the customer for entering an unarranged overdraft position and therefore did not comply with the requirements of Part 6 of the Order."

Nationwide is set to refund the majority of affected customers by 27 March, while all refunds will be concluded by 29 May.

Sara Bennison, chief marketing officer at Nationwide Building Society, 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."

The CMA said that since 11 November last year, Nationwide had removed all unarranged overdraft charges.