Metro Bank to Refund 130,000 Customers for Overdraft Charges

Metro Bank will return £11.4 million in overdraft charges to current account customers after it failed to properly notify them about the fees.

The bank breached a rule, in place since February 2018, that requires banks contact customers who dip into their unarranged overdraft about the associated fees before charging them. However, between February 2018 and December 2019, Metro Bank’s texts to 130,000 customers failed to inform them they would be charged and in some cases were sent too late, the Competitions and Market Authority (CMA) found.

Metro Bank customers who went into their unarranged overdraft weren’t given the opportunity to avoid charges—of £10 per payment which took them over their overdraft, for a maximum of £60 a month. Metro Bank will refund £10.5 million in these charges to customers, plus 8% interest, taking the total payout to £11.4 million.

Affected customers will receive an average payout of £86. Metro Bank said it is proactively contacting all customers owed a refund via email or letter and aims to return the money the summer. If you believe you’re owed a refund and haven’t been contacted by 30 June 2020, you’re advised to contact the bank.

Metro Bank will also consider claims for additional costs incurred due to the error, such as if an unarranged overdraft charge caused you to miss other payments. 

David Thomasson, chief commercial officer at Metro Bank, says: “We are very sorry that we didn’t include all the information we should have done on our overdraft text alerts, and that on certain occasions some customers did not receive these alerts before 10 am as they should have done.

“This isn’t the level of service that we pride ourselves on providing and we are now contacting any customers who have been impacted to put things right for them as quickly as possible.”

Adam Land, senior director for remedies, business and financial analysis at the CMA, 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.”

Metro Bank isn’t the first bank to run afoul of the notification requirements. Nationwide has twice been censured by the CMA for breaching regulations about overdraft warnings. The building society refunded 320,000 customers £6 million in August 2019 and an additional 70,000 customers £900,000 in February. In December 2019, the CMA also ordered HSBC and Santander to refund customers unarranged overdraft fees they weren’t properly notified about.

Overdraft rules changed this month, with banks no longer able to charge customers different sums for arranged and unarranged overdrafts or to levy daily fees instead of interest on overdrafts. To conform with the new rules, Metro Bank has scrapped its £10 per payment charge for unarranged overdrafts and replaced it with a flat 34% interest rate for both arranged and unarranged overdrafts.