Clydesdale and Yorkshire Bank has been ordered to compensate mortgage customers it treated unfairly as well as pay a fine. We answer five questions on the fine.
Who has ordered Clydesdale and Yorkshire Bank to compensate customers?
The Financial Conduct Authority (FCA) has fined the bank £8.9m. The authority said customers were not made aware of their rights after errors in 42,500 accounts in 2009.
It added that Clydesdale was concerned with its own commercial interests rather than its customers.
Around 22,000 customers will now receive payouts averaging £970.
What happened exactly?
There was a calculation error on customers’ mortgage repayments demands over a four year period to 2009. Due to the error, 22,000 customers had underpaid their mortgages and were subsequently expected to increase their monthly repayment to make up for the short fall.
The FCA said this was unfair and the bank should have taken on the cost rather than shifting it to the customer.
How big were the shortfalls?
The underpayments ranged from £20 to over £18,000. They will now be paid back in compensation. Those with outstanding mortgages will see their debt reduced while others will receive a cheque.
A further 20,500 who paid too much of their mortgage may be able to claim compensation as well.
Overall the bank has said the cost of the fine and compensation would total £42m.
What has the FCA said?
"For most people mortgage payments are their biggest monthly outgoing and we all budget on the assumption that the information our mortgage lender gives us about what we need to pay is correct," said Tracey McDermott, of the FCA.
"Here Clydesdale failed in that basic duty and, when it discovered the problem, sought to pass all of the consequences on to its customers - expecting them to find the money to remedy mistakes which were entirely of Clydesdale's making.
"Clydesdale is today paying the price for its decision to put its bottom line ahead of the need to ensure its customers were treated fairly."
What has Clydesdale said?
"I am very sorry that this was not 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," said David Thorburn, chief executive of Clydesdale and Yorkshire Bank, which is owned by National Australia Bank.
"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."