Overdraft refunds: Are you owed an overdraft refund? How to check if you are owed money

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OVERDRAFTS CHARGES have been reduced or adapted for many amid the coronavirus pandemic, but are you owed an overdraft refund?

Overdraft charges are costs incurred for using an unarranged overdraft. In February 2018, the Retail Banking Market Investigation Order came into force requiring banks to send customers text alerts before going into unarranged overdrafts. Failure to do this has landed some banks in trouble. Banks who breached this have been refunding customers, but are you entitled to a refund?

Banks have paid out £47m over the past two years after failing to warn customers about unarranged overdraft charges.

The Competition and Markets Authority (CMA) took action against five of the UK’s biggest banks and building societies for breaching Part 6 of the Retail Banking Market Investigation Order 2017.

The CMA’s order required banks to send a text alert warning of fees before banks charged them for using an unarranged overdraft.

Receiving this alert is then designed to give people an opportunity to take action to avoid unexpected charges.

The CMA began enforcing the order in 2018, but soon found several high street banks were failing to comply with these regulations.

The CMA found that HSBC had breached the law on two counts; one relates to HSBC’s ‘unsociable hours policy’, which meant that the bank did not contact customers between 10.45pm and 7.30am on weekdays, and 10.45pm and 10am on weekends and bank holidays.

In addition, the CMA found Santander made six breaches of the Retail Banking Market Investigation Order.

Metro Bank, HSBC, Nationwide and the Royal Bank of Scotland were also found to have breached the order.

Since 2018, the CMA’s action has led to refunds for customers amassing to:

  • Royal Bank of Scotland: £2.2m
  • Santander: £17m
  • Metro Bank: £11m
  • HSBC: £8m
  • Nationwide: £7m

What is an unarranged overdraft?

An unarranged overdraft occurs when you spend more money than you have in your account and any agreed overdraft limit with your bank.

Arranged limits are agreed between banks and customers and mean customers can spend money up to that limit.

Your bank will charge you interest, and sometimes other fees on top.

Unarranged overdrafts will charge you for going over the limit, including surpassing your authorised overdraft amount.

Who is eligible for a refund?

A total of 130,000 Metro Bank customers will receive average payments of about £86, after the bank failed to warn them properly about unarranged overdraft charges.

Therefore for many struggling in this financial climate, an overdraft refund is more important than ever.

You may be eligible for a refund if:

You were charged for using your unarranged overdraft after 2018 without receiving a warning text message.

You have been contacted by your bank to alert you to the fact you were charged unfairly.

Who is not eligible for a refund?

You will not be eligible for a refund if:

  • You have used your arranged overdraft
  • You have never used your unarranged overdraft
  • You received a text warning you that you were about to go into an unarranged overdraft and will be charged for doing so.

What is an unarranged overdraft?

Who is eligible for a refund?

Who is not eligible for a refund?

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