UPDATED: City watchdog hits Yorkshire Building Society with largest ever fine for sector

Tracey McDermott, of the Financial Conduct Authority
Tracey McDermott, of the Financial Conduct Authority
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THE CITY watchdog has hit Yorkshire Building Society with a £4.135m fine, the largest to date to be levied on a building society.

It is the second time this year that the Financial Conduct Authority has fined the Bradford-based mutual.

Today’s penalty was for failings when dealing with mortgage customers experiencing payment difficulties.

Tracey McDermott, the FCA director for enforcement and financial crime, said Yorkshire Building Society’s actions “meant that customers in vulnerable circumstances risked falling into further financial difficulty”.

The lender has started repaying a total of £8.4m in redress to around 33,900 customers.

Chris Pilling, chief executive, said: “As a mutual organisation owned by our members, the service we give to customers is fundamental to us and we are very sorry for letting them down.”

The FCA said call handlers between October 2011 and July 2012 failed to deal properly with customers in payment difficulties.

It said they failed to promptly identify the cause of their problems and their future financial prospects.

The FCA said these failures led to significant delays in determining the best payment solutions, which meant that some customers incurred increased fees and associated interest.

The watchdog blamed the failings on “insufficient training and fragmented guidance” and said the issues were not spotted because of weaknesses in checking procedures and management information and a failure to identify customer complaints.

Ms McDermott said: “Customers in financial difficulty need to be treated fairly and sensitively.

“Firms must ensure that they are taking into account the particular circumstances affecting customers who find themselves in difficulty.

“Firms need to be dealing with these customers proactively, without delays, in order to ensure they are not losing out.”

In a statement, Yorkshire Building Society said the FCA recognised it did not seek to gain financially.

The mutual said its failures resulted from an approach which gave customers more time to get themselves out of financial difficulties, with repossessions properly viewed as a last resort, and this delayed the agreement of repayment arrangements.

The mutual said it has made improvements to its processes and that some of these were already underway before the FCA raised concerns.

The watchdog, then known as the Financial Services Authority, wrote to Yorkshire Building Society in September and October 2012 highlighting serious failings in the monitoring and oversight of cases discovered during a previous visit.

The FCA ordered a “skilled person review” - an independent study of a firm’s activities - in May 2013, which found that in 64 out of 87 cases considered, customers were not treated fairly.

It identified customer detriment in 52 of those cases.

In February, Yorkshire Building Society announced it would voluntarily refund all administration fees for mortgage arrears since January 2009. This will result in 33,900 former and current customers receiving an average of £247 in refunded fees.

The FCA said the mutual’s move was voluntary, proactive and prior to the enforcement investigation.

A spokeswoman for Yorkshire Building Society said: “Even when we make mistakes we put customers at the heart of what we do and do the right thing to put it right.”

The mutual said it has invested in its systems, increased colleague training and developed processes to provide a better understanding of customers’ financial difficulties and how it can help them.

Yorkshire Building Society agreed to settle at an early stage of the FCA investigation, qualifying for a 30 per cent discount on the fine.

Yorkshire Building Society fines total £5.5m this year

THE Financial Conduct Authority rebuked Yorkshire Building Society and Credit Suisse this June for misleading inexperienced customers over investments that had almost zero chance of achieving maximum returns.

The City watchdog fined the pair £3.827m, including £1.429m for the Bradford-based lender. Yesterday’s penalty brings the building society’s total FCA fines this year to £5.564m.

A spokeswoman for the FCA said the lender is subject to the remuneration code under which performance-related pay is obliged to take into account non-financial criteria, including risk management and compliance in regulatory systems.