View more on these topics

FSA fines Bank of Scotland £4.2m over inaccurate mortgage records

FSA Letters 480

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.”


News and expert analysis straight to your inbox

Sign up


There are 4 comments at the moment, we would love to hear your opinion too.

  1. When you think that’s £16.80 per customer, it doesn’t seem such a steep fine.

  2. You have to feel sorry for Lloyds Group directors who were almost forced to buy HBOS at any cost by Gordon. Would they have bought such a poor business under normal circumstances?

    Makes you wonder what the Regulator was doing with HBOS in the years before and what Accountants were saying about the state of the business! Lies, more lies and damn lies.

  3. More outrageous is that HBOS were allowed to raise their cap by 1%.

    Q. When is a capped rate not a capped rate?
    A. When the lender can increase it at will.

    Just ridiculous that they are allowed to call it a cap.

  4. Steve, I’ve pondered this too.

    Was there some back door deal done between the government of the day in order to massage the deal through? Or was Lloyds simply too greedy at the chance to increase the size of their business? After all, RBS made a huge mistake buying Amro.

    Perhaps they all became too blaze about being infallible. The bonus culture and all the ideology surrounding it could suggest this.

    Shall we ever know the complete truth?

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm