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Bank of Scotland fined £4.2 million for failing to keep accurate mortgage records
FSA/PN/094/2012
19 Oct 2012
The Financial Services Authority (FSA) has fined Bank of Scotland (BOS) £4.2 million for failures in their systems which meant it held inaccurate mortgage records for 250,000 of its customers. This was the result of mortgage information being held on two separate unaligned systems, and problems with two further processes where manual updates were not always carried out. The effect was that BOS relied on incorrect records for considerable periods of time between 2004 and 2011.
The issue first came to light when BOS put in place a programme to rectify the fact that some Halifax customers had received potentially confusing information about changes to their mortgage contracts, specifically relating to the standard variable rate. While monitoring a consumer forum website, the FSA found a number of customers complaining that they had been wrongly excluded from the programme and had not received goodwill payments.
As well as excluding this group, the problem was compounded when BOS incorrectly contacted 33,700 customers who should never have been included in the programme, and mistakenly made goodwill payments totalling £20.4 million to 22,700 of them.
Tracey McDermott, FSA director of enforcement and financial crime said:
"These mistakes stemmed from the fact that Bank of Scotland had an inadequate mortgage records system meaning they could not identify which of those 250,000 customers were subject to a cap on their standard variable rate.
"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.
"In a complicated organisation where several legacy systems exist, firms have to make sure they are synchronised, otherwise it is their customers who suffer.”
BOS was found to have breached Principle Three of the FSA’s Principles for Business, which requires a firm to organise and control its affairs responsibly and effectively, with adequate risk management systems. BOS agreed to settle with the FSA at an early stage of the investigation. Without this early settlement and the firm’s co-operation, the fine would have been £6 million.
Notes for editors
Bank of Scotland fined £4.2 million for failing to keep accurate mortgage records
FSA/PN/094/2012
19 Oct 2012
The Financial Services Authority (FSA) has fined Bank of Scotland (BOS) £4.2 million for failures in their systems which meant it held inaccurate mortgage records for 250,000 of its customers. This was the result of mortgage information being held on two separate unaligned systems, and problems with two further processes where manual updates were not always carried out. The effect was that BOS relied on incorrect records for considerable periods of time between 2004 and 2011.
The issue first came to light when BOS put in place a programme to rectify the fact that some Halifax customers had received potentially confusing information about changes to their mortgage contracts, specifically relating to the standard variable rate. While monitoring a consumer forum website, the FSA found a number of customers complaining that they had been wrongly excluded from the programme and had not received goodwill payments.
As well as excluding this group, the problem was compounded when BOS incorrectly contacted 33,700 customers who should never have been included in the programme, and mistakenly made goodwill payments totalling £20.4 million to 22,700 of them.
Tracey McDermott, FSA director of enforcement and financial crime said:
"These mistakes stemmed from the fact that Bank of Scotland had an inadequate mortgage records system meaning they could not identify which of those 250,000 customers were subject to a cap on their standard variable rate.
"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.
"In a complicated organisation where several legacy systems exist, firms have to make sure they are synchronised, otherwise it is their customers who suffer.”
BOS was found to have breached Principle Three of the FSA’s Principles for Business, which requires a firm to organise and control its affairs responsibly and effectively, with adequate risk management systems. BOS agreed to settle with the FSA at an early stage of the investigation. Without this early settlement and the firm’s co-operation, the fine would have been £6 million.
Notes for editors
- The Final Notice.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.
- The FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. The Financial Services Bill currently undergoing parliamentary scrutiny is expected to receive Royal Assent by the end of 201
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