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FCA Fights for Mortgage Customers with Hefty Fines on Firms

Monday, 6 January 2014

The Financial Conduct Authority (FCA) demonstrated its increased willingness to exercise supervisory powers over regulated financial firms on multiple occasions during 2013.

Its pro-active approach to consumer protection was emphasised by its fining of Clydesdale Bank to the tune of £8.9 million in September 2013 for failing to treat its mortgage customers fairly and inform them of their rights.

Clydesdale's Miscalculation of Mortgage Repayments

Clydesdale Bank discovered in April 2009 that it had miscalculated the repayments on over 42,500 variable rate customer mortgages. Approximately 22,000 accounts were left with shortfalls because repayments were insufficient to repay the mortgages by the end of the agreed terms.

The overall shortfall for Clydesdale was £21.2m with an average shortfall of £970 for individual customers, who faced unexpected increases in monthly repayments to correct the error and make up their shortfalls.

Clydesdale contacted customers and set up a call centre to deal with queries, but sought repayments from customers as a priority. The bank implied that there was no alternative for customers to bringing their payments up to date, and this misleading information was compounded by poor instructions to call handlers dealing with customer complaints.

Clydesdale Bank Fined for Mishandling of Consumer Problems

The fine issued to Clydesdale Bank was not for the calculation error but for the mishandling of the problem and poor customer relations once the error was found.

The FCA said that Clydesdale failed in its basic duty to its customers when it discovered the problem and sought to pass “the consequences on to its customers – expecting them to find the money to remedy mistakes which were entirely of Clydesdale’s making.”

According to the FCA “firms must put the interests of customers at the heart of their business if we are to restore trust and confidence in financial services” and Clydesdale is ‘paying the price’ for its self-serving decision “to put its bottom line ahead of the need to ensure its customers were treated fairly.”

Clydesdale volunteered a scheme by which “all customers who were left with shortfalls as a result of the error will be automatically compensated,” and those who overpaid can make a claim for compensation.


The FCA has a stringent penalty regime to calculate fines for breaches to its code of conduct and Clydesdale’s fine would have been higher but for the redress scheme and a 30% discount for settling at an early stage of the enforcement process.

For specialist advice in relation to financial regulation or FCA proceedings contact James Crighton or telephone 0207 611 4848.

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