Bank of Scotland fined £4.2m for bad mortgage data

The Financial Services Authority has fined Bank of Scotland £4.2 million for keeping inaccurate mortgage records, which lead to many customers being sent misleading information about their mortgages.

Between 2004 and 2007, Halifax (which merged with BoS in 2001) sent 250,000 mortgage customers a letter about forthcoming changes to their borrowing rates, which included the promise of a ‘goodwill’ payment following the changes.

In 2011, many customers complained online that they were having trouble receiving the goodwill payment they thought they were due. It transpired that the information sent on the original letters had been inaccurate.

An investigation by the FSA found that the misleading information was the result of poor integration between the bank’s mortgage records system and its mortgage offer letters system, and its reliance on manual information entry within the process.

"From September 2004 until May 2006, the Mortgage Offer Letters sent to customers [affected by the change] stated they would be moved to the most current version of the Terms and Conditions, namely Version 22," the FSA wrote in its report on the investigation.

"As part of this process a customer was required to sign and return to the Bank a Deed of Variation (Deed). Upon receipt of the signed Deed, staff were required to manually update the Borrowers system to reflect the move to Version 22.

"However this manual change was not always effected and as a result approximately 60,000 customers’ details were not updated on the Borrowers System."

In a statement, the FSA’s director of enforcement Tracey McDermott said that: "These mistakes stemmed from the fact that Bank of Scotland had an inadequate mortgage records system.

"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.” 

The FSA would have fined BoS £6 million had it not agreed to settle the dispute at an early stage of the investigation.

The fine is yet another indictment of the UK banking sector’s reliance on legacy IT systems. This came into focus in June, when a failed upgrade to a batch processing system caused Royal Bank of Scotland’s systems to fall over.

Halifax-Bank of Scotland (HBOS) merged with Lloyds TSB in 2009, creating the largest retail bank in the UK. Earlier this month, Information Age spoke to the enterprise architect responsible for mapping the two organisations’ application estates in preparation for the merger.

A number of factors made gathering accurate information about the 2,800 business applications within Lloyds and HBOS a challenging task, Mike Cox explained. These included the fact that there were a number of consultants within business units, all of whom had different views on how the business should operate.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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