Over 115,000 HSBC and Santander customers owed overdraft charge refunds

The Competition and Markets Authority (CMA) has ordered the two providers to pay out, after both broke a legal order requiring banks to alert customers before they're hit with unarranged overdraft charges.

HSBC has agreed to pay an estimated £8 million to approximately 115,754 customers. While this works out at an average refund of about £70, the bank says cases will be looked at individually, so refunds could be higher or lower. The payments will consist of refunds of the overdraft charges, plus 8% interest.

Santander has also agreed to refund affected customers, but it hasn't yet been able to confirm the number of those impacted or the amount it will pay.

The banks also need to do an independent check of how they complied with the legal order between February 2018 and December 2019.

HSBC and Santander aren't the first providers to be rapped over this rule – the CMA ordered Nationwide to pay £6 million to customers in August after it failed to send the correct unarranged overdraft alerts.

See our Cut Overdraft Costs guide for more info on managing overdrafts.

Why are the banks refunding customers?

Since February 2018, a legal order from the CMA has meant banks must alert customers who go into an unarranged overdraft before they're charged. This gives them the chance to pay into their account and avoid being hit with a fee.

But HSBC has broken this order twice, while Santander breached it six times.

HSBC's first breach was due to its 'unsociable hours' policy, which means it doesn't contact customers after 10.45pm. As a result, most customers who went into their unarranged overdraft after this time weren't alerted until the next day – when they'd already been charged.

Its second breach was due to its systems for storing some customers' phone numbers not being compatible with its text alerts system, meaning some customers weren't contacted.

Santander's six breaches included failing to put customers' mobile numbers onto its alerts system in some cases, not alerting some customers who went into unarranged overdrafts as a result of overnight direct debit payments, and not sending alerts until later than they should have.

I'm a Santander or HSBC customer – what should I do?

HSBC says it's already started contacting affected customers to apologise and tell them about the refund, and says this will continue into the New Year.

Refunds will be paid automatically into customers' bank accounts, so you shouldn't need to do anything – and HSBC says it will also be contacting those who have since closed their accounts. In this case, HSBC says it will collect the customer's new bank details to make the payment, or issue a cheque.

If you think you're affected but have since switched banks and changed your details, you can contact HSBC on 03456 040 626 or using its live chat function.

Santander says it's working to identify and refund customers "as quickly as possible". We've asked how customers will receive their refunds, and will update this story when we hear back.

You can contact Santander on 0800 171 2171 or by using its app or live chat function via online banking.

What do the banks say?

An HSBC spokesperson said: "We apologise to those customers who for different reasons did not receive an alert.

"We will continue contacting customers who incurred overdraft charges as a result of these issues to apologise and provide a refund."

A Santander spokesperson said: "We are very sorry that some customers in certain circumstances were not sent the required overdraft alerts. The introduction of these alerts is a move we welcomed and believe is a real support to customers.

"We have carried out a detailed review to understand why the errors happened and have taken steps to fix the issues. We are now working to identify and refund all affected customers as quickly as possible."