On 28 May 2020, the Competition and Markets Authority wrote to the Royal Bank of Scotland Group (RBS) in relation to two breaches of Part 6 of the Retail Banking Market Investigation Order 2017 (the "2017 Order"). The letter details not only the breaches but the remediation action taken to put things right for customers.
What went wrong?
Breach 1 - When rolling out the programme of alerts for unarranged overdraft usage, required by the 2017 Order, RBS failed to enrol around 179,000 personal current account (PCA) customers. These customers had previously held youth accounts before their accounts were converted to adult PCAs. These customers should have been enrolled in the programme within 10 working days of their accounts becoming adult PCAs.
Breach 2 - RBS charged around 36,000 customers for going into or trying to go into an unarranged overdraft before they received their first alert. This breach arose as a consequence of Breach 1.
How is it being put right?
RBS are putting things right by refunding customers the unarranged overdraft charges that were applied in error. They will add interest of 8% to these refunds. RBS will also consider reasonable claims for additional costs suffered as a result of the charges. RBS will be refunding £1.9 million, they will pay £2.2 million once interest is accounted for.
How does this sit in terms of customer treatment?
When putting things right the idea is that you put the customer back in the position they would have been in had the issue not happened. In my opinion the remediation activity proposed by RBS does follow best practice. It follows three key steps:
- Refund: refunding customers what was erroneously charged. This gets rid of the charges but isn't quite the same as not applying the charges in the first place. I'd say it's a first step, but doesn't go all the way.
- Interest: applying simple interest of 8% takes account of the fact that the customer was deprived the opportunity of using those funds from the point charges were erroneously applied to the point they were refunded. You're now closer to putting the customer back in the position they would have been in.
- Other considerations: considering claims for other costs suffered. This is really important as customers could have suffered financial detriment that RBS can't reasonably guess from looking at their account history. In addition, RBS do not have visibility on the customer's wider situation at the time.
I would say the other important step in all of this is communication. The letters, emails or phonecalls that customers receive about this are really important. When a financial services firm contacts a customer they need to be upfront in apologising for their error. They also need to be clear, fair and not misleading when detailing how they are fixing things. Customer Service teams need to be ready to deal with queries or concerns that customers may have on the back of remediation communications. Financial services firms certainly don't want to cause further detriment when attempting to put things right!
If your firm needs support in dealing with rectification projects and remediation activity please do get in touch.
Per the CMA letter, impacted RBS customers will be refunded during the summer of 2020. It remains to be seen whether their remediation activity will result in retaining long term customers.