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FCA fines Clydesdale Bank £8.9m over mortgage miscalculations

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The Financial Conduct Authority has fined Clydesdale Bank £8.9m for failing to inform its customers clearly of their rights after the bank miscalculated the repayments on over 42,500 mortgages.

Clydesdale, which is owned by National Australia Bank, has agreed to compensate all those who underpaid on their mortgages as a result of the regulator’s action and will write to other affected customers.

In April 2009 Clydesdale discovered an error in how it had calculated mortgage repayments for customers with variable rate mortgages. As a result of the error, incorrect repayments were made on over 42,500 customer accounts.

Of these, approximately 22,000 accounts were left with shortfalls because customers made repayments that were insufficient to repay their mortgages by the end of the agreed terms.

The calculation error was corrected in 2010. However, these 22,000 customers then faced unexpected increases in their monthly repayments both to correct the error and to make up for their shortfalls.

In total there was a £21.2m shortfall in Clydesdale mortgages, which left customers who had underpaid with mortgage balances higher than they should have been. The shortfalls ranged from less than £20 to more than £18,000, with an average of £970.

After discovering the error, Clydesdale contacted customers and set up a dedicated call centre to deal with any queries.

However, in seeking repayment from customers as a priority, it wrongly sought to balance its own commercial interests against the requirement to treat customers fairly, the FCA said.

It said that the letters the bank sent to customers suggested that they had no alternative but to bring their repayments up to date.

Many customers, however, could have rejected demands to repay the shortfalls caused by Clydesdale’s calculation errors, the regulator suggested.

This lack of clarity was made worse by poor instructions to Clydesdale’s call handlers for dealing with customers who called to complain.

FCA director of enforcement and financial crime Tracey McDermott said: “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.

“Firms must put the interests of customers at the heart of their business if we are to restore trust and confidence in financial services. Clydesdale is today paying the price for its decision to put its bottom line ahead of the need to ensure its customers were treated fairly.”

Clydesdale drew up a scheme following the FCA’s findings, which will automatically compensate all customers who were left with shortfalls as a result of the error.

Were it not for Clydesdale’s redress scheme, the fine would have been higher, the FCA said. Clydesdale also received a 30% discount for settling at an early stage of the enforcement process.


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