Although the error had existed since 2005, they bank claim that it had little impact on customers before 2008 as interest rates moved up and down. The total cost of providing customer redress, including the £8.9 million fine imposed by the FCA, is expected to be approximately £42 million, of which the vast majority had already been provided for by the end of June 2013.
Where their error resulted in a capital shortfall on a customer mortgage, the Bank will write off the entire shortfall, make a payment representing interest costs and recalculate the reduced payment amount where appropriate. The average shortfall to be written off is £970. In total, there was a £21.2 million shortfall in customer mortgages.
David Thorburn, chief executive, said:
“I am very sorry that this wasn't handled as it should have been. We should have made it clear at the time that this was entirely our fault and that some customers may be entitled to compensation.
“Our priority is to fix this for customers as quickly as possible and they will each receive a letter explaining how we will make this right for them. In addition, an automatic compensation process for customers who underpaid as a result of our error is in place to provide immediate resolution for over 14,000 customer accounts. Those customers will receive a full apology and confirmation of their refund within the next 48 hours. We will work with the remaining customers, whose cases are more complex, to discuss how they may have been affected and what their options are. The vast majority will hear from us by mid-October.
“We have voluntarily agreed to take action that will go over and above that required by the FCA. While the fine has been calculated under the new and more stringent penalty regime, we are grateful that our efforts to put this right for customers quickly have been recognised and the penalty reduced.”
