Nationwide is to refund £6m in overdraft fees to thousands of customers across the UK after the building society failed to send them the correct text warnings about unarranged overdrafts.
Bank customers must receive a text alert before they are charged for entering unarranged overdrafts.
A total of 320,000 customers were affected and are set to receive a reimbursement of the charges.
The Competition and Markets Authority (CMA) has directed Nationwide to take immediate action and improve its practices.
Any new processes must be audited by an independent body.
Nationwide said in a statement: "Nationwide has sent over 19 million alerts since the rules were introduced. We have engaged proactively with the CMA to review these incidents, which were first reported to them in 2018 and the wording was corrected in November 2018. We have implemented improvements and additional controls to ensure this does not happen again. These controls are currently being reviewed by independent third parties.
“As an organisation that prides itself on service, we apologise for these incidents and any inconvenience caused. We have started the process for refunding members and will ensure no one is left out of pocket."
Adam Land, CMA senior director for remedies, business and financial analysis, said: “The text alerts we ordered banks to send to customers if they are about to slip into an unarranged overdraft are key to helping them avoid unexpected fees. Nationwide failed to do this on numerous occasions and our action today makes it clear they must fix this as a matter of urgency. It’s imperative that these problems are sorted out immediately and that they don’t occur again.
“Although we are pleased that Nationwide is going to reimburse customers affected, the CMA needs stronger powers for cases like this which is why we are seeking the ability to impose fines when firms breach our orders.”
The CMA has also published a letter today to Nationwide about a breach of the Northern Ireland Personal Current Account Banking Market Investigation Order 2008.
Nationwide informed the CMA in June 2019 that, between June 2018 and June 2019, it had failed to provide leaflets on switching Personal Current Accounts to around 120,000 customers in breach of that order. Although the order was revoked before the CMA was notified of the breach, Nationwide has committed to provide affected customers with those leaflets.
In June, Credit Strategy reported that the Financial Conduct Authority (FCA) would be overhauling its overdraft rules, including stopping banks and building societies from charging higher prices for unarranged overdrafts than for arranged overdrafts and banning fixed fees for borrowing through an overdraft.