Consumer Group Speaks Out Against Handling of Mortgage Mistake

by Mark Johnston

Following a mortgage error caused by Australian owned Clydesdale and Yorkshire bank, the company has been trying to rectify shortfalls with customers and in some cases has demanded the customer repay the underpayment. Following a large number of customer complaints, a consumer group has spoken out against the handling of the issue.

The group, consumer focus has contacted the financial services regulator to ask them to step in and protect customers from having to pay for the banks mistake. They believe that the Clydesdale Bank is not meeting the Financial Services Authority’s (FSA) treating customers fairly policy by demanding repayments.

Earlier this year thousands of already cash strapped borrowers faced increases to their monthly mortgage payments due to an error caused by Clydesdale and Yorkshire Bank. Around 18,000 customers of the two banks who currently held variable and tracker rate mortgages were affected by the error. Both banks are owned by National Australia Bank (NAB). NAB took over The Clydesdale back in 1987 when midland sold its UK subsidiaries. The Yorkshire Bank was taken over in 2001by Clydesdale and has retained its mostly Yorkshire based branches and its name.

The error is a result of the two banks calculating capital payments incorrectly. The miscalculation resulted in both banks collecting less than the minimum monthly payment. This was made worse by the record low interest rates. These underpayments have led to many of its customers having shortfalls on their mortgages which means they will not pay off their mortgages within the agreed term.

Since the news hit the headlines back in July, the bank has been fighting a losing battle against claims lodged by their customers. The financial ombudsman service which looks after complaints and financial claims within the financial services industry is pushing the bank the cover the missing payments. The bill is estimated to be up to £19 million.

When the error was first uncovered both the Clydesdale and Yorkshire bank asked their customers to make up the missing payments. Although they admitted the mistake was caused by their own miscalculation, they took the view that it was their customers responsibility to pay back any shortfall.

The Clydesdale bank has been trying to recover the shortfall by asking its customers to make higher monthly repayments of up to an additional £200 per month. Many of its customers believe that it’s unfair to be asked to pay for the banks mistake and have referred complaints to the Financial Ombudsman Service (FOS) which deals with disputes between financial institutions and their customers. As a result the Ombudsman has ruled in their favour which has left the bank at the top of the tables in terms of customer complaints.

Mike O’Connor, chief executive of Consumer Focus said: “We would expect any bank that wants a reputation for treating customers fairly to repay everyone who was caught out by the bank’s own mistake.”

In response a spokesperson for Clydesdale Bank said: “We apologised back in July to those customers affected by this mortgage under payment issue. 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.”

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