Tens of thousands of people who held a student current account with RBS or NatWest between 2002 and March 2016 are due to receive a refund of overdraft charges.
RBS Group, which owns NatWest and the Royal Bank of Scotland (RBS), started writing to affected customers from 15 August informing them that they were wrongly charged interest. Many have already received refunds, while those still due will be paid within the next 14 days.
For help with wrongly-applied bank charges, see our Reclaim Bank Charges guide.
What went wrong?
NatWest and RBS offered interest-free overdrafts on their student current accounts (they still do). However, some customers were given the option to increase their arranged overdraft limit. If they chose this option they were then charged interest on the larger overdraft.
After a business review carried out in March this year, the banks discovered that terms and conditions of the accounts weren't as clear as they could have been in respect of these interest charges and that customers should not have been charged interest on any authorised overdrafts.
Any interest it charged on these authorised overdrafts between November 2002 and March 2016 will be refunded, plus interest.
How do I know if I was affected?
RBS and NatWest have been writing to all affected customers since 15 August. If you've opened a student current account with NatWest or RBS since March 2016 then you won't have been affected.
However, if you think you could have been affected and don't hear from them, it's worth contacting them directly, even if you no longer hold an account with either bank.
How much could I be refunded?
Affected customers will receive a full refund of the interest they were charged, plus interest of 8% a year (from the year they were first affected – we're checking if this is simple or compound interest and will update this story when we know more). If you're still a NatWest or RBS customer this will be paid into your account with them. If not, you'll receive a cheque for the amount of refund you're due.
RBS Group says that typically refunds will be in the tens of pounds, though it'll vary.
Basic rate tax will be deducted from the 8% interest it adds onto the refund. If you're a non-taxpayer or living abroad, you'll need to contact HMRC to reclaim the tax deducted – if you're a higher or additional rate taxpayer, you'll need to contact it to pay more.
What does RBS Group say?
A spokesperson for RBS Group says: "When we make a mistake we do everything we can to make it right. It was highlighted after a business review that between 2002-16 our terms and conditions on our student account were not fulfilled. As a result we are refunding all interest charged over that period."