Clydesdale Bank slated for its treatment of mortgage clients

A government-appointed consumer watchdog is calling on Clydesdale and Yorkshire Bank to do the right thing by its mortgage customers.

Consumer Focus has written to the bank to demand that it stop asking customers to meet the costs of its mistakes. The call comes after the bank miscalculated repayments for 18,000 mortgage holders and then raised monthly payments to recover the resulting shortfall. 

The statutory consumer watchdog estimates that the cost of the error will be at least £10m.

Consumer Focus is also writing to the FSA to urge it to take enforcement action unless Clydesdale Bank takes prompt steps to do the right thing by all of the affected customers. 

In July last year, Clydesdale Bank revealed it had failed to accurately calculate interest rates for some of its variable and tracker mortgage holders, meaning minimum repayments were set at too low a level. 

The bank apologised for the error but still sought to recoup the resulting shortfalls by increasing payments, in some cases by over £100 to monthly bills. 

Clydesdale Bank continued to take these retrospective payments despite clear indications from the Financial Ombudsman Service (FOS) that consumers shouldn’t be held responsible for errors of this type. FOS publicly clarified its approach in September, leaving no room for confusion, says Consumer Focus.

The FOS said that in the second half of last year complaints from Clydesdale Bank customers about mortgages increased by more than 600% on figures from January to June 2010. Disgruntled Clydesdale Bank mortgage customers who have taken their case to the Ombudsman have had their complaint upheld in 87% of cases, against an industry average of 36%.

Customers report receiving thousands of pounds back from the bank after the Ombudsman ruled in their favour.

Mike O’Connor, chief executive of Consumer Focus, said: “Clydesdale 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. 

“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.”