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February 2022
Monzo Wasn’t Upfront About Overdraft Fees, Regulator Says
The UK’s Competition and Markets Authority (CMA) has reprimanded popular digital bank Monzo after for three years it failed to make customers aware of the full cost of going into the red, in a breach of banking regulations.
Under regulations, banks must disclose to current account customers the maximum charge each month for exceeding their pre-agreed credit limit. This Monthly Maximum Charge (MMC) tells customers exactly how much they’ll pay for dipping into their unarranged overdrafts. It also makes it easier for customers to compare the cost of current accounts from all banks and building societies.
The CMA said: “This measure, in combination with other parts of our reforms, was designed to make it easier for consumers to be aware of the charges they may be liable to pay and compare this information easily against other PCA [personal current account] providers.”
But between 25 October 2018 and 19 November 2021, Monzo’s fee information document failed to include its Monthly Maximum Charge (MMC), the CMA found. This meant Monzo customers weren’t aware that they could pay up to £15.50 per month for using their unarranged overdraft.
The bank did publish that total in its terms and conditions, but not in its fee information document, the CMA found.
However, the watchdog opted not to pursue further enforcement action against Monzo because the bank rectified the error in November 2021 after it was made aware of it and has implemented measures to prevent a reoccurrence.
Monzo said: “This is a legacy issue we addressed last year. We have taken steps to make sure it does not happen again.”
This isn’t the first time Monzo has been investigated by the CMA for breaches of competitions law. Last year, the watchdog found that the startup failed to send more than 143,400 customers their transaction histories when they shut their current accounts.
But the wrist slaps from regulations haven’t slowed down the bank’s growth. Monzo currently has around five million customers, most of them in the UK, and regularly posts some of the highest net gains of customers among current account providers.
Just this week, Monzo officially launched in the United States, after an 18-month closed beta test, despite failing to win a full banking licence in the country. The company, founded in 2015, is currently valued at £3.3 billion.
