The FSA has fined Bank of Scotland £4.2m for system failures which meant it held inaccurate mortgage records for 250,000 of its customers.
Bank of Scotland held mortgage information on two separate systems and problems with processes meant manual updates were not always carried out. The effect was the bank relied on incorrect records for considerable periods of time between 2004 and 2011.
The issue emerged when Bank of Scotland put in place a redress programme for Halifax customers who had received potentially confusing information about changes to their standard variable rate.
In October 2008, Halifax raised its SVR cap from 2 per cent to 3 per cent above Bank of England base rate but failed to inform all affected borrowers. In February 2011 Lloyds Banking Group, which owns the Halifax and Bank of Scotland brands, agreed with the FSA to carry out a past business review and pay redress where necessary. It was estimated that redress would be up to £500m.
As a result, borrowers who thought they were protected by the 2 per cent cap were hit with higher repayments than they anticipated when rates fell in 2009.
While monitoring a consumer forum website, the FSA found a number of customers complaining they had been wrongly excluded from the programme and had not received goodwill payments.
Bank of Scotland also incorrectly contacted 33,700 customers who should never have been included in the programme, and mistakenly made goodwill payments totalling £20.4m to 22,700 of them.
FSA director of enforcement and financial crime Tracey McDermott says: “These mistakes stemmed from the fact that Bank of Scotland had an inadequate mortgage records system meaning they could not identify which of those 250,000 customers were subject to a cap on their SVR.
“This breach is particularly serious because the inaccuracies built up over a period of seven years. There was no structure in place to identify errors as they occurred and no checking procedures thereafter.
“In a complicated organisation where several legacy systems exist, firms have to make sure they are synchronised, otherwise it is their customers who suffer.”