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Bank of Scotland fined £4.2m after seven-year mortgage mix-up
Bank of Scotland customers missed out on £162 million of goodwill payments after problems with the bank's systems spanning seven years.
Bank of Scotland has been fined £4.2 million by the City watchdog for failing to keep accurate mortgage records, meaning customers were given inaccurate information for seven years.
The details of 250,000 mortgage customers were held on two unaligned systems, and the Financial Services Authority (FSA) found manual updates to the systems were not always carried out, which meant the bank had incorrect records between 2004 and 2011.
The problem was only highlighted when Bank of Scotland put in place a programme to rectify another problem that saw some Halifax customers receiving potentially confusing information about changes to their mortgage contracts, specifically in respect to standard variable rates.
The regulator picked up on this customer confusion while monitoring an online consumer forum where a number of customers had complained they had not received goodwill payments even though they had received incorrect information from the bank.
The incorrect records meant 15% of the 250,000 Halifax mortgage customers did not receive information regarding variations in their mortgages. All of the 250,000 Halifax customers were excluded from the goodwill payment programme because of system errors, meaning £162 million of payments were not paid out.
However, 22,700 customers who should never have received payments did so, to a total of £20.4 million.
Tracey McDermott, FSA director of enforcement and financial crime, said: ‘These mistakes stemmed form 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 standard variable rate.
‘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.’
She added: ‘In a complicated organisation where several legacy systems exist, firms have to make sure they are synchronised, otherwise it is their customers who suffer.’
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