Metro Bank to refund £10.5m in overdraft charges
21 Apr 2020
Metro Bank is to repay more than £10.5m in overdraft fees to thousands of customers after it breached a legal order by failing to send texts warning about unarranged overdraft charges, reports Pat Sweet
21 Apr 2020
The Competition and Market Authority (CMA) found the challenger bank had breached Part 6 of the CMA Retail Banking Market Investigation Order 2017. This requires banks to ensure that customers with personal current accounts receive a text alert warning about charges before banks charge them for unarranged overdrafts, so they have time to act and can avoid unexpected fees.
The regulator’s investigation found that Metro Bank failed to inform nearly 130,000 customers that they would be charged for entering an unarranged overdraft.
Although text alerts were sent, these did not inform customers that they would be charged. This breach has been continuing since February 2018, when the order was introduced. Additionally, some of these alerts were sent later than they should have been.
As well as refunding £10.5m in fees, Metro Bank has offered to pay back 8% interest on the charges bringing the expected total remuneration to around £11.4m. It will also consider reasonable claims for extra costs incurred by affected customers.
Refunds are expected to be completed by summer 2020.
Adam Land, CMA senior director for remedies, business and financial analysis, said: ‘The text alerts we ordered banks to send to customers have been crucial in helping people avoid unexpected fees from entering an unarranged overdraft.
‘While it is disappointing to see so many customers being charged wrongly, Metro Bank’s commitment to refund those affected – and to cover interest charges and consider claims for extra costs suffered – will put this right.’
Last year Metro Bank revealed it is under investigation by both the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) over accounting errors relating to its risk weighted assets (RWA).
The bank initially said its RWA were expected to be approximately £8.9bn, but was then forced to admit that the Bank of England had spotted errors on some loans, which mean it needed to account for an additional £900m in RWA.
CMA letter to Metro Bank is here.
By Pat Sweet