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Response to FCA Mortgage Decision

26th September 2013

Clydesdale Bank and Yorkshire Bank have responded to today’s announcement from the Financial Conduct Authority (FCA) in respect of a mortgage payment system error which came to light in April 2009.

This resulted in some mortgage payments being incorrectly recalculated whenever interest rates changed. Although the error had existed since 2005, it had little impact on customers before 2008 as interest rates moved up and down. When interest rates moved steadily downwards from 2008, the error began to materially impact mortgages. For some customers, this meant their payments were less than the minimum required to repay their mortgage over the agreed term. The system was corrected, and, after we wrote to customers, payments were increased to make up any shortfall from April 2010.

David Thorburn, chief executive, 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.

“Our priority is to fix this for customers as quickly as possible and they will each receive a letter explaining how we will make this right for them. In addition, an automatic compensation process for customers who underpaid as a result of our error is in place to provide immediate resolution for over 14,000 customer accounts. Those customers will receive a full apology and confirmation of their refund within the next 48 hours. We will work with the remaining customers, whose cases are more complex, to discuss how they may have been affected and what their options are. The vast majority will hear from us by mid-October.

“We have voluntarily agreed to take action that will go over and above that required by the FCA. While the fine has been calculated under the new and more stringent penalty regime, we are grateful that our efforts to put this right for customers quickly have been recognised and the penalty reduced.”

Customers with one of the over 42,500 accounts affected by the original payment calculation issue need take no immediate action and will receive a letter explaining the next steps. Where our error resulted in a capital shortfall on a customer mortgage, the Bank will write off the entire shortfall, make a payment representing interest costs and recalculate the reduced payment amount where appropriate. The average shortfall to be written off is £970. In total, there was a £21.2 million shortfall in customer mortgages.

The total cost of providing customer redress, including the £8.9 million fine imposed by the FCA, is expected to be approximately £42 million, of which the vast majority had already been provided for by the end of June 2013.

To support customers, the Banks have today published Questions & Answers on their websites: and In addition, a dedicated customer support helpline will be available to all customers being written to.

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