ANZ, Commonwealth Bank, and Westpac customers will receive refunds.

More than $28 million will be refunded after major banks were found to have overcharged low-income Australians who should have had low-fee accounts, the market watchdog says.

ANZ, Bendigo and Adelaide Bank, Commonwealth Bank, and Westpac kept at least two million people in high-fee accounts with steep dishonour and overdraw charges when they could least afford it, according to the Australian Securities and Investments Commission.

The Better Banking for Indigenous Consumers report, released on Monday, revealed that most banks also had challenging ‘opt-in’ processes for switching to no or low-fee options, including requiring some consumers to travel hundreds of kilometres to their nearest branch.