The Competition and Markets Authority (CMA) has given a ruling on a matter regarding Nationwide. The regulator has ordered Nationwide to return more than £6 million to over 320,000 customers.
Nationwide failed to meet the CMA’s requirements that bank customers should receive a text alert before charges are executed on the customers’ current account. The CMA issued the directive in a bid to protect customers from unexpected fees.
Senior Director of remedies at the CMA, Adam Land, said that Nationwide failed to do as directed on numerous occasions and the action applied by the CMA makes it clear that the bank should rectify the matter immediately.
The bank came up with a proposal to refund the affected customers. Nationwide stated that they have intentions to start repaying customers and initiating the necessary communications by November 2019 and by mid-December, they expect to have made most of the required refunds.
A spokesperson from the bank said that the bank prides itself on service and they apologize for the inconvenience caused. He added that the process to refund customers has started, and no one will be left out of the process.
Nationwide makes changes
Nationwide has put into place measures that will ensure that they become compliant with the CMA’s requirements. The bank said that starting from 11 November, customers will no longer be charged unexpected overdrafts, but the bank will now place a 39.9% APR on overdrafts.
While customers no longer have to pay daily fees for overdrafts, the new method being employed by Nationwide may be more expensive than the old system. After several complaints about consumers being charged excessive fees, the Financial Conduct Authority (FCA) issued a ban on daily fees for overdrafts. The regulator now requires financial institutions to charge an annual interest rate effective by April 2020.
The application of annual interest rate makes it easier for customers to make decisions to buy stocks, for example and still know exactly how much their bank will charge them.
The use of an annual interest rate makes it less confusing for customers, and it is easier to keep track of. It does away with the need for one to calculate how much they have been charged per overdraft and limits the number of queries regarding these charges.
The method is used in other types of borrowing, and this brings uniformity to how banking institutions apply charges for the different kinds of borrowing while placing one of the best high-interest investment rates on overdrafts.
Nationwide has also said that they have made changes to their notifications system. The system has been improved to ensure that customers who are at risk of being charged for overdrafts are notified before they incur the fees.