Banks pay out after major overdraft error – thousands affected

Banks pay out after major overdraft error – thousands affected

Banks are required to send customers text alerts to inform them of fees they could incur for using this unarranged facility, as a result of rules established in 2017. However, Santander and the Royal Bank of Scotland (RBS)- which own Natwest – admitted these rules had been somewhat breached over the last few years. This means thousands could be entitled to overdraft refunds.

This is in addition to the £2million in refunds Santander has already been forced to pay in an announcement in May 2019.

An open letter from the Competitions and Markets Authority (CMA) published this week laid out the RBS group’s errors.

The letter stated the first error arose when RBS failed to enrol adult personal current accounts (PCAs) which were previously youth accounts into a programme of alerts within 10 working days.

As a consequence, the group ended up charging 36,000 customers for going into or attempting to go into an unarranged overdraft without first sending an alert.

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He 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.”

Responsibility for overdraft rules will now fall under the remit of the Financial Conduct Authority (FCA).

In December 2019, the FCA introduced its own reforms to overdraft rules, and now requires banks to send text alerts to customers for any and all overdraft charges.

Many people have turned to overdraft facilities in recent months as a result of the COVID-19 crisis.

But banks have been required to offer their customers interest free overdrafts of up to £500 for three months. 

Published at Sun, 31 May 2020 12:51:00 +0000