Lloyds Banking Group has agreed with the FSA to undertake a review of past mortgage contracts which could cost the lender up to £500m.
Halifax will write to approximately 600,000 customers from April 2011. Through the contact programme the lender expects to make goodwill payments to around 300,000 customers.
In a statement to the stockmarket this morning, Lloyds says the review will look at Halifax mortgage customers who may have been confused by the wording on mortgage offer documents.
The potential confusion relates to wording found in the mortgage offer document which summarises the Halifax standard variable rate cap. It affects borrowers who were on SVR and who had an early repayment charge in their mortgage.
In September 2007 the lender removed a cap summary, which was included in the offer document between September 2004 and September 2007, on the back of regulatory guidance. The lender then changed the cap from 2 per cent to 3 per cent above base rate in October 2008, due to “extenuating economic circumstances”.
The bank will offer goodwill payments of £250 to borrowers on SVR and who had an ERC as an acknowledgement that it was unclear how the cap affected their mortgage. It will also offer a goodwill payment of the 1 per cent balance between the two cap rates to those borrowers on SVR who thought they should have been on a lower rate.
The programme aims to ensure customers are fully aware of what the SVR cap is and how it relates to their borrowing.
Bank of Scotland has applied for a voluntary variation of permission to carry out the customer review and contact programme.
LBG says it has made a provision of £500m for the programme within its 2010 accounts.