Clydesdale Bank has been fined £8.9m for failing to inform 42,500 customers of their rights after it miscalculated thousands of mortgage repayments.
On top of the fine issued by the Financial Conduct Authority (FCA), the bank will also compensate customers who underpaid on their mortgage as a result of the miscalculations and will write to other affected customers.
Customers who overpaid can also use our guide to complain about their mortgage provider if they believe they suffered financially as a result of Clydesdale Bank’s error.
The bank discovered the error in April 2009 where it miscalculated repayments for customers with variable rate mortgages. As a result, incorrect repayments were made on 42,500 accounts and 22,000 people were left with shortfalls.
The underpayments ranged from £20 through to £18,000, with an average of £970. As a result, when the error was corrected in 2010 customers with shortfalls saw an unexpected increase in their repayments.
Clydesdale Bank put commercial interests ahead of customers
Although Clydesdale Bank contacted customers to explain the error and set-up a dedicated call centre to deal with queries, the FCA found it had put its commercial interests ahead of its customers.
It had prioritised getting repayments and in letters to customers suggested they had no choice but to bring their accounts up to date. Many customers, however, could have rejected demands to repay the shortfalls caused by Clydesdale Bank’s calculation errors.
The regulator also found call handlers had been given inadequate instructions and customer queries were handled poorly as a result.
Affected customers will be contacted
Tracey McDermott, the FCA’s director of enforcement and financial crime, said of the fine: ‘For most people mortgage payments are their biggest monthly outgoing and we all budget on the assumption that the information our mortgage lender gives us about what we need to pay is correct.
‘Here Clydesdale failed in that basic duty and, when it discovered the problem, sought to pass all of the consequences on to its customers – expecting them to find the money to remedy mistakes which were entirely of Clydesdale’s making.’
Clydesdale said it will now write to all customers who were affected by the error and who did not receive compensation following the bank’s original communication exercise. Mortgage-holders do not need to do anything until they are contacted by Clydesdale.
The bank said 14,000 customers will receive compensation within the next 48 hours and most remaining customers will be contacted by mid-October.