The Competition and Markets Authority (CMA) has also ordered the building society to put in place procedures to ensure that similar problems do not happen again.
As well as these legally binding directions, Nationwide has already repaid more than £100,000 to customers who did not receive reminders and apologised.
This order makes Nationwide the fifth largest provider of PPI in the UK to be issued directions from the regulator.
It most recently took action against Santander and RBS, resulting in the latter having to pay customer refunds of £1.5m.
Nationwide breached the order in two ways. First, by failing to provide reminders to customers over a six-year period, from 2012 to 2017, meaning those affected did not have all the relevant information to help them decide if they wanted to continue paying for PPI.
Second, the building society sent out inaccurate reminders from 2012 to 2019 which contained incorrect information about the yearly cost of insurance, meaning customers may have been misled into thinking their PPI was cheaper than it actually was.
These practices may have stopped people from shopping around, could have meant they did not know they were still paying for PPI or could have encouraged customers to keep or renew their insurance with Nationwide.
‘Nationwide failed customers’
Adam Land, senior director of remedies, business and financial analysis at the CMA, said: “Nationwide has failed its customers by denying them important information, and the directions we’ve issued today will lead to affected customers receiving the refunds they deserve.
“Such breaches are serious and, if we had the extra powers we’ve proposed to the government, could have resulted in fines.”
Sara Bennison, chief marketing officer at Nationwide Building Society, added: “The PPI order requires providers to send customers with PPI an annual review to remind people of the cover they have in place and alert them to the cost, giving them the chance to shop around if required.
“Unfortunately, in these cases the society failed to send out an annual review or sent one with incorrect information.
“The society has rectified the issues and is in the process of providing redress to affected customers. On this occasion we fell below our usual high standards and for this we apologise,” she said.