Bank of Scotland was fined £4.2m by the City regulator yesterday for holding inaccurate mortgage records for 250,000 of its customers.
Failures in the bank’s systems meant that it relied on incorrect records for “considerable periods of time” between 2004 and last year, the Financial Services Authority (FSA) said.
It said the mistakes stemmed from Bank of Scotland holding two separate systems for its mortgage information which were not properly linked up.
The problems came to light when the bank put a programme in place to correct the fact that some customers of Halifax, which is part of the same banking group, had received potentially confusing information about changes to their mortgage contracts relating to their standard variable rate (SVR), the FSA said.
The regulator discovered that a number of customers had complained on a consumer website that they had been wrongly left out of the programme and had not received any goodwill payments.
The mistakes grew even worse when Bank of Scotland incorrectly got in touch with 33,700 customers who should never have been included in the programme and mistakenly handed out £20.4m worth of goodwill payments to 22,700 of them.
FSA director of enforcement and financial crime Tracey McDermott said: “This breach is particularly serious because the inaccuracies built up over a period of seven years.
“There was no structure in place to identify errors as they occurred and no checking procedures thereafter.”
Bank of Scotland has confirmed it will not try to claw back the goodwill payments it wrongly handed out to customers.
A statement released on behalf of the bank said: “Bank of Scotland has apologised to customers, co-operated fully with the regulator throughout this process and has agreed to pay a fine of £4.2m.”