Nearly half a million personal loan and credit card customers are in line for a windfall after a raft of lenders agreed to repay over £149 million in interest and charges following paperwork errors.
The Office of Fair Trading (OFT) has ordered 17 banks and building societies – which have not been named – to compensate 497,000 customers after it found documents relating to store cards, credit cards, loans and hire purchase agreements failed to comply with the Consumer Credit Act.
Customers don't need to take any action as they should be contacted directly by their bank or building society shortly if their agreement is affected (see our Best Bank Accounts guide for the best buys).
Some of the breaches date back as far as 2008, with lenders failing to provide the required wording or information in statements and arrears notices.
In some cases, they broke rules on providing annual statements within 30 days of being due, or they failed to tell customers how much they owed within 14 days of a default, the OFT says.
Under the Consumer Credit Act, lenders are not entitled to interest or arrears fees during the period that their statements don't comply with the Act. This means they must now pay the money back.
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The OFT wrote to 50 banks and building societies last November following a string of similar errors made by Barclays, Northern Rock and The Co-operative Bank.
Northern Rock Asset Management had to pay out £270 million to people after a documentation blunder emerged in December 2012. Barclays said last September it was repaying interest and charges to as many as 300,000 customers, at a cost of about £100 million, after falling foul of the law.
The Co-operative Bank revealed in October that it had increased its provisions for customer redress, in part to cover "an identified breach of the Consumer Credit Act".
David Fisher, senior director for consumer credit at the OFT, says: "These issues were not deliberate misconduct, but the institutions concerned should have ensured they were complying with the law.
"The OFT welcomes the proactive steps taken to return money to customers where it was incorrectly charged."