HSBC and Santander UK will refund the overdraft fees of more than 115,000 customers.
The Competition and Markets Authority (CMA) reported that both banks failed to comply with new regulations that requires financial institutions to text customers when their accounts are close to running out of money so they can avoid being charged fees. As a result, HSBC will refund £8 million ($10.3 million) to 115,000 customers who were charged without receiving warning texts. And Santander, which failed to comply with the regulation six times, has also agreed to issue a refund but first needs to determine how many customers were affected and how much would need to be paid back.
“We are very sorry that some customers in certain circumstances were not sent the required overdraft alerts. The introduction of these alerts is a move we welcomed and believe is a real support to customers,” a Santander spokesperson said, according to the Financial Times. “We have carried out a detailed review to understand why the errors happened and have taken steps to fix the issues. We are now working to identify and refund all affected customers as quickly as possible.”
In addition, the CMS also asked the two banks to check whether they have committed any other breaches of the rule since it was implemented in February 2018 after an 18-month CMA investigation of the retail banking market. Next year stricter rules will prevent banks from charging higher overdraft fees, as well as order them to provide customers with more transparent pricing information.
Back in 2017, Bank of America reached a settlement in a lawsuit over extended overdraft fees, agreeing to pay consumers $66.6 million after a lawsuit that contended the bank’s extended overdraft fees was really interest and, as a result, was subject to rules that prevented excessive fees.