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Release Date: 24th September 2013

To access the original FCA document, click here.


The Financial Conduct Authority (FCA) has imposed an £8.9 million fine on Clydesdale Bank for failing to fairly treat its mortgage customers after discovering a calculation error on over 42,500 variable rate mortgage accounts. This miscalculation led to incorrect repayment amounts, affecting around 22,000 accounts with significant shortfalls, resulting in unexpected increases in monthly repayments for these customers.

The error, identified by Clydesdale in April 2009 and rectified in 2010, created a total shortfall of £21.2 million across affected accounts. Customers faced shortfalls ranging from under £20 to over £18,000, with an average of £970 per affected account. In response, Clydesdale not only established a dedicated call centre but also began contacting customers to rectify the issue. However, the bank prioritised its commercial interests over fair customer treatment by insisting that customers had no option but to cover the shortfall, despite the bank’s responsibility for the error.

The FCA criticised Clydesdale’s approach, highlighting that the bank’s initial communications suggested customers were obligated to make up the payment differences, disregarding that customers could reject these demands. This was exacerbated by inadequate guidance provided to call handlers dealing with complaints, further misleading customers about their rights and options.

Tracey McDermott, FCA’s director of enforcement and financial crime, emphasised that mortgage payments are significant household expenditures and that customers depend on accurate information from their lenders. She pointed out that Clydesdale not only failed in this basic duty but also inappropriately transferred the burden of their error onto the customers.

To address the issue, Clydesdale agreed with the FCA to automatically compensate customers who underpaid due to the bank’s error and to offer compensation claims for those who overpaid. This redress scheme is part of why the FCA welcomed Clydesdale’s approach despite the severity of the failings.

The fine of £8.9 million reflects penalties applicable for breaches post-6 March 2010, aimed at higher sanction levels. Clydesdale received a 30% discount for settling early in the enforcement process. Moving forward, Clydesdale will contact all affected customers who did not previously receive compensation.

This case underscores the FCA’s commitment to consumer protection, highlighting the importance for financial institutions to maintain accurate account management and transparent, fair communication, especially when errors that affect customers financially occur.

For other firms, the key takeaway is the critical need to prioritise customer interests and ensure compliance with regulatory standards to avoid similar punitive measures.

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