The FCA has fined Clydesdale Bank £8.9m over failing to treat its mortgage customers fairly after miscalculating repayments on 42,500 mortgages.
Clydesdale, owned by National Australia Bank, has agreed to compensate borrowers who underpaid on their mortgages as a result of the errors and is writing to other affected customers.
The bank says where its errors resulted in a capital shortfall, it will write off the entire shortfall, make a payment representing interest costs and recalculate the reduced payment where appropriate.
Clydesdale estimates the total cost of redress, including the £8.9m fine, is expected to be £42m. The bank had made a provision for most of this amount by the end of June.
In April 2009 Clydesdale found an error in how it had calculated mortgage repayments for customers with variable rate mortgages. The error meant incorrect repayments were made on over 42,500 customer accounts.
Of these, around 22,000 accounts were left with shortfalls because repayments were insufficient to repay customers’ mortgages by the end of the term. The calculation error was corrected in 2010.
Some borrowers faced unexpected monthly increases to their mortgage payments of more than £500 while one customer had an £18,501 shortfall. The average was £970.
Clydesdale chief executive David Thorburn says: “I am very sorry this was not handled as it should have been. We should have made it clear at the time this was entirely our fault and that some customers may be entitled to compensation.
“Our priority is to fix this for customers as quickly as possible and they will each receive a letter explaining how we will make this right for them.”