Clydesdale, a subsidiary of National Australia Bank, has agreed to compensate all the affected customers who received lesser payment on their mortgages and also write to other affected customers.
The UK financial watchdog claimed that Clydesdale found miscalculation in mortgage repayments for customers with variable rate mortgages in April 2009, and due to this mistake, inaccurate repayments were made on over 42,500 customer accounts.
Out of the total, about 22,000 accounts were left with deficits, as the customers made repayments that were insufficient to repay their mortgages by the end of the agreed terms. The bank rectified the calculation error in 2010.
During probe, it was revealed that there was a £21.2m shortfall in Clydesdale mortgages in total, with customers who underpaid left with mortgage balances higher than they should have been.
Under the terms of the settlement agreement, approximately 22,000 customers will receive payouts ranging from £20 to £18,000.
After realizing its mistake, the bank informed the affected customers and established a dedicated call centre to deal with any queries.
While seeking repayment from customers on priority basis, the lender wrongly planned to balance its own commercial interests against the requirement to treat customers fairly.
FCA enforcement and financial crime director said Tracey McDermott said 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.
"Firms must put the interests of customers at the heart of their business if we are to restore trust and confidence in financial services," McDermott added.
The regulatory agency said that the penalty would have been higher if there was no Clydesdale’s redressal scheme, and it further availed a 30% discount for settling at an early stage of the enforcement process.
