Bank of Scotland Pays FSA Fine For Poor Mortgage Record Keeping

The Bank of Scotland has been fined £4.2million by the Financial Services Authority (FSA) after failing to keep an accurate record of compensation due to mortgage customers. The bank is part of the Lloyds Banking Group, meaning that this is yet another blow to one of the biggest players in the financial services industry.

Halifax, which is owned and operated by the Bank of Scotland, had kept incorrect records on numerous borrowers, which then resulted in 160,000 home owners not receiving the compensation they were entitled to after the bank failed to inform them of changes to their loans. The customers, who had found their repayment system altering with no warning, were supposed to receive a good will payment from the bank to make sure they weren’t adversely affected by the lack of communication, but it never reached them.

Instead, 22,000 mortgage holders who were not entitled to compensation from the bank got the money, totalling £20.4million. The errors date back seven years and were discovered by the FSA during monitoring of a consumer advice website. On the forum of the website, numerous customers had complained that they had not received the compensation they were entitled to, so the FSA took a deeper look into the matter.

Upon discovery of the issue, the FSA informed the bank who co-operated fully with the investigation. If they hadn’t, they would have been handed a £6million fine once everything was unearthed.

What this means for the customers is unclear, but the bank is likely to try and make amends. Whether this is too little too late will depend on the customer, but it goes to show the value of having a strong regulatory body overlooking the financial services industry. Without groups that can force banks to correct these errors, consumers would have no recourse when they lose out because of situations like this.