A reader used my overdraft affordability complaint template letter to ask Santander for a refund:
Santander are refunding 5, nearly 6, years worth of fees and interest and 8%. It’s over £3.5k… amazing! This pays off my overdraft completely with spare and the overdraft will be removed.
That was a “full refund” – the maximum she could have got from the Financial Ombudsman (FOS). She was very happy with the result.
Then she told me the surprising timescale.
Santander had rejected her complaint so she sent it to FOS in late November. But after only three weeks FOS contacted her and said Santander wanted to make a settlement offer. This was before anyone at FOS had started to look at the case.
That’s pretty unusual. I assumed Santander realised they had made an error and wanted to put it right straight away.
This was not an isolated case
Here is a comment left in late December:
Another person winning against Santander! They have agreed to refund all charges/fees on my 3 overdrafts from Dec 2016 onwards. This was after only being with the FOS for 2 weeks.
After that I looked back and found a couple more where Santander had made full refund offers in October and another in November.
So that was five cases where Santander had originally rejected the complaint but had then offered the settlement before a FOS adjudicator had started to look at the case.
What the rejection letters said
We didn’t make a mistake
This phrase was used in a couple of letters:
While I appreciate the problems this has caused you, my investigations have shown that this wasn’t due to a mistake on our part.
It’s your fault not ours
They didn’t quite use those words, but that is the implication behind:
We do not force a customer to use an overdraft and it remains the customer’s responsibility to manage their overdraft effectively.
But allowing someone to have an overdraft that is so large it is impossible to get out of is not fair to the customer. And Santander knows perfectly well that they have a regulatory duty to treat their customer fairly.
One rejection letter gave this general description of overdraft limit checking:
It may help if we explain that before an overdraft is applied to an account, we conduct a range of checks which we are required to complete for every customer to ensure that we treat all customers fairly and that Santander acts as responsible lender within the financial market. This process is repeated each time a customer requests an overdraft limit increase.
But how good were the checks in practice? And were they really carried out each time?
The customer getting this letter had had more than 20 overdraft increases in less than three years. The other 4 cases were more standard, without such a huge number of overdraft increases. But for Santander’s limit checking to not pick up on this sort of case makes it sound like Computer Says Yes rather than a proper check.
Another letter went into more detail about what the checks were:
To ensure that we are lending responsibly, we use a scoring system when looking to increase a customers overdraft facility and when looking to offer them credit. This isn’t something that is taken lightly and is reviewed by our underwriters to ensure that the customer can manage their financial affairs. Regrettably we do not have the resources to check every account to see if a customer is in financial hardship, nor can we assume that they are.
Obviously there is no personal bank manager who looks at every request for a limit increase anymore. But if a bank wants to use a scoring system, it has to be good at detecting financial hardship. And one of the obvious things to include in it is the number of times an increase has been requested. Surely after the first few increases a human should look at the case?
Quoting an irrelevant court case
One rejection letter said:
Please note that the Supreme Court provided guidance on bank charges in the matter of The Office of Fair Trading v Abbey National &Ors. After considering Regulation 6(2)(b) of the Unfair Terms in Consumer Contracts Regulations (UTCCR), the court decided that bank charges formed part of the price or remuneration for the banking services provided, It was therefore unanimously decided that the level of bank charges couldn’t be assessed for fairness under UTCCR. As such, I respectfully believe that there is no basis on which your complaint can be pursued.
That was actually totally irrelevant to the customer’s complaint, which was not about the level of the bank charges at all. But I guess it was supposed to look impressive to the customer, so they think there is no point in taking the complaint to the Ombudsman.
Apart from the list of overdraft limit increases, no letter I have seen makes any mention of the customer’s income, account history, credit record etc.
They are generic rejections, not specific to the complaint. And no letter makes any reference to the annual overdraft reviews Santander is supposed to undertake.
How many customers gave up and didn’t go to FOS?
So the rejection letters from Santandar weren’t short and dismissive. They were lengthy and looked as though they explained in detail why Santander hadn’t done anything wrong. Many people may have thought they sounded authoritative and must be right.
One customer said
I wasn’t going to take it further because I thought the ombudsman would throw it out too because the bank did.
Luckily she told me it had been rejected and I told her to send it straight to FOS.
A deliberate strategy on the part of Santander?
Mistakes do happen. But five very similar cases in a short period suggests more than the odd mistake on Santander’s part.
One possibility is that Santander has realised in late 2022 that it has had a major problem with its overdraft complaint handling and is trying to correct it.
The other possibility is that this was not an accident. Santander decided to reject many good overdraft complaints because it knew that many would not be sent to FOS so this would save it money. But it then settles a lot straight away rather than have FOS inspect them.
In either case, it is unfair on customers who have not taken their complaint to FOS because of the misleading rejection letter. Santander should review all rejections over the last year and contact the affected customers again with a better response to their complaint.
Has your overdraft been a big problem for a long while?
Overdraft debts can be very hard to get out of because the charges are so high. And if you are in your overdraft for all or most of the month, it may seem impossible.
But all banks are supposed to review your overdraft each year, not carry on charging high fees when you are in difficulty. So read How to ask your bank for a refund of overdraft charges and think about making an affordability complaint.
As you can see from this article, banks are rejecting some good cases. You know if the overdraft has been a real problem so if you have a rejection, send it straight to the Ombudsman!