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Clydesdale fined £8.9m for customer treatment over mortgage errors

26 September 2013

Clydesdale Bank has been fined £8.9m by the Financial Conduct Authority for failing to inform its customers clearly of their rights after the bank miscalculated the repayments on over 42,500 mortgages.

The error affected repayments for customers with variable rate mortgages, with about 22,000 of those affected being left with shortfalls at the end of the mortgage term due to insufficient repayments. Shortfalls ranged from under £20 to over £18,000, with an average of £970 and an overall total of £21.2m. As a result customers faced unexpected increases in payments, both to reach the correct level and to make up their previous shortfall.

After discovering the error in April 2009, Clydesdale contacted customers and set up a dedicated call centre to deal with any queries. However, in seeking repayment from customers as a priority, the bank has been penalised for wrongly seeking to balance its own commercial interests against the requirement to treat customers fairly.


Letters sent to customers suggested that they had no alternative but to bring their repayments up to date. Many customers, however, could have rejected demands to repay the shortfalls caused by Clydesdale’s calculation errors. This lack of clarity was compounded by poor instructions to Clydesdale’s call handlers for dealing with customers who called to complain.

Tracey McDermott, the FCA’s director of enforcement and financial crime, commented: "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.

"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.

"Firms must put the interests of customers at the heart of their business if we are to restore trust and confidence in financial services. 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."

Clydesdale, which is owned by National Australia Bank, has agreed to compensate all those who underpaid on their mortgages as a result and write to other affected customers. This process has been agreed with the FCA, which has an objective to secure an appropriate degree of protection for consumers.

Those who overpaid can make a claim for compensation if they believe they suffered financially as a result of Clydesdale’s error.

The £8.9 million fine was calculated using the penalty regime that the FCA applies to breaches committed from 6 March 2010, which was introduced in part to increase fine levels. The fine would have been higher were it not for Clydesdale’s redress scheme. Clydesdale also received a 30% discount for settling at an early stage of the enforcement process.

Mortgage-holders do not need to do anything until they are contacted by Clydesdale, but information about the bank’s further customer communication and redress exercise can be found on its website at

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