Yorkshire Bank ‘must pay’ for mortgage error

A CONSUMER group today urged the City watchdog to take action against the Clydesdale and Yorkshire banks if they continue to demand mortgage customers make up repayment shortfalls caused by a computer error.

Consumer Focus has written to the lenders, which are both part of National Australia Group, saying they should cover the cost of the mistake and not ask consumers to make up the difference between what they were charged and what they should have paid.

The group has also written to the Financial Services Authority calling on it to take enforcement action, unless the banks take prompt steps to “do the right thing” by affected customers.

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It emerged in July last year that 18,000 customers at the banks had underpaid their mortgages due to an internal error, with some people facing hikes of up to £300 a month to make up the shortfall.

The consumer group, which estimates that a total of at least £10 million needs to be made up, said the banks should take into account guidance issued by the Financial Ombudsman Service (FOS) over the issue, and not pursue customers for the extra money.

Data published by the FOS earlier this week showed that it had received 410 complaints about mortgages with the banks during the second half of 2010 - a 600% increase on the previous six months.

Although it is not known how many of the disputes related to the underpayment issue, the ombudsman said 87% of mortgage and home finance claims were upheld in favour of consumers.

Mike O’Connor, chief executive of Consumer Focus, said: “Clydesdale and Yorkshire Bank must now stand up and do the right thing for anyone who has been asked to make up shortfalls caused through no fault of their own.

“It should give up attempts to recover this money and certainly refund any customer who paid after the clarification by the Financial Ombudsman.

“It is unacceptable that people have gone right through Clydesdale’s internal complaints procedure only to have to take their case to the ombudsman to have big sums written off.”

Barry Gardner, media relations director at Clydesdale and Yorkshire Banks, said: “This is not a new issue and our position remains unchanged.

“It is disappointing that the conclusions reached by Consumer Focus do not reflect the information we have provided them.

“We apologised back in July to those customers affected by this mortgage underpayment issue. The vast majority accepted they were simply being asked to pay back the amount they’d originally agreed to when taking out their mortgage.

“Our priority has been to be fair to all customers in the way we dealt with this and we have considered each case on its individual merits, offering a range of flexible payment options.”