Nationwide Building Society is refunding £6 million to current account customers after breaking rules relating to text alerts designed to help people avoid unexpected overdraft charges.
Nationwide was found to have broken part of the Competition and Markets Authority’s retail banking market investigation order.
The order ensures customers with personal current accounts receive a text alert before banks charge them for unarranged overdrafts. This gives customers time to top up their accounts to avoid unexpected charges.
Nationwide admitted contravening the order 20 times, affecting over 320,000 customers.
Some problems dated as far back as February 2018 – from when the order was introduced – the Competition and Markets Authority (CMA) said.
In over 80% of the incidents identified, customers did receive a text alert from Nationwide. But the wording did not comply with the order.
The CMA said the texts failed to make clear to customers that they could incur charges by failing to take action, which is an important part of the order.
The CMA has directed Nationwide to take immediate action and improve its practices and compliance with the order. Any new processes must be audited by an independent body.
Nationwide has changed its wording in texts from: “Please pay in enough cleared funds by 2.30pm so your payments can be sent,” to: “Please pay in enough cleared funds by 2.30pm so your payments can be sent and to avoid unarranged overdraft fees.”
The building society said the wording was corrected in November 2018.
Adam Land, CMA senior director for remedies, business and financial analysis, said: “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 today 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.”
Nationwide also informed the CMA in June 2019 that, between June 2018 and June 2019, it had failed to provide leaflets on switching personal current accounts to around 120,000 customers in breach of the Northern Ireland personal current account banking market investigation order 2008.
The CMA said that although that order was revoked before it was notified of the breach, Nationwide has committed to provide affected customers with the leaflets.
A Nationwide spokeswoman said: “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.”