National Australia Bank’s (NAB) UK subsidiary Clydesdale and Yorkshire Bank (CYB) has been fined £9m ($14.5m) by the UK’s Financial Conduct Authority (FCA) for failing to correctly manage the repayments of 42,500 mortgages.
The Clydesdale and Yorkshire Bank has responded to the decision saying that it expects the final cost of the banks mistakes to be around £42m.
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The average cost to the consumer according to the bank is £970 but could have been as high as £18,000.
David Thorburn, chief executive at CYB, 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.
The errors became known at the bank after interest rates fell in 2008 due to a mistake in the way CYB calculated repayments. This meant 22,000 variable-rate customers underpaid on their mortgages and were left with shortfalls.
The bank contacted the affected customers in 2010 telling them they would have to up their monthly repayment rate to meet the shortfalls.
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By GlobalDataThe FCA has found that customers should not have to repay the shortfall if they did they should be compensated.
The watchdog said that CYB failed to inform customers that they permitted to reject demands by the bank to repay the money caused by the banks internal error.
Tracey McDermott, the FCA’s director of enforcement and financial crime, 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.
"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."
CYB must now pay £8.9m directly to the regulator and make repayments to individual customers in the coming months who will be contacted individually.
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