Lloyds Banking Group has struck a deal with the FSA to undertake a review of past Halifax mortgage contracts which could cost it up to £500m.
The confusion relates to mortgages taken out between September 2004 and September 2007 when Halifax was offering loans with an SVR rate cap at 2 per cent above the base rate.
Only certain customers were supposed to benefit from the cap, however, marketing literature made other customers also believe they would benefit.
In October 2008, the cap was lifted from 2 per cent to 3 per cent above the base rate but only the qualifying customers were informed.
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.
Customers will receive refunds equal to the extra interest they will have paid since January 2009, when base rates fell.
The average payout to the 300,000 customers affected is around £1,600.
The bank is also offering a goodwill payment of £250 to customers who were informed about the SVR cap increase.
Lloyds says it has made a provision of £500m for the programme in its 2010 accounts.
Email Mortgages chief executive Michael White says: “How could Halifax allow this to happen? It makes you wonder what sort of mess the Halifax was in prior to the acquisition.”
But First Action Finance head of communications Jonathan Cornell says: “An organisation that has supported the housing market as well as Halifax is not going to go into contracts with the view to misleading people.”