FCA fines Yorkshire Building Society £4,135,600 for failings in dealing with customers in mortgage arrears

Yorkshire Building Society (YBS) has today been fined £4,135,600 for failings when dealing with its mortgage customers experiencing payment difficulties.

Between 1 October 2011 and 31 July 2012, call handlers at YBS, dealing with customers in payment difficulties, failed to deal properly with these customers in order to identify promptly the cause of their problems and their future financial prospects.

These failures led to significant delays in determining the most appropriate payment solutions. YBS properly viewed repossession as a last resort but failed to recognise that delays in reaching long term payment solutions meant that some customers incurred increased fees and associated interest. YBS has already started to refund these customers.

Tracey McDermott, FCA director of Enforcement and Financial Crime said:

“Customers in financial difficulty need to be treated fairly and sensitively. Firms must ensure that they are taking into account the particular circumstances affecting customers who find themselves in difficulty. Firms need to be dealing with these customers proactively, without delays, in order to ensure they are not losing out.

“By allowing cases to drift without agreement, YBS’s actions meant that customers in vulnerable circumstances risked falling into further financial difficulty.”

The investigation found that insufficient training and fragmented guidance meant that call handlers did not consistently probe customers’ circumstances and identify the cause of their problems.

These issues were not spotted because weaknesses in checking procedures and management information, and a failure to identify customer complaints, meant that YBS management was deprived of information that may have highlighted poor treatment of customers.

In September and October 2012, the FSA wrote to YBS highlighting serious failings in the monitoring and oversight of cases discovered during a previous visit. The FCA ordered a Skilled Person review in May 2013 which found that in 64 out of 87 cases considered, customers were not treated fairly and in 52 of these cases customer detriment could be identified.

YBS agreed, voluntarily and proactively, prior to the enforcement investigation commencing to refund all mortgage arrears fees, plus associated interest, charged to customers since January 2009. The redress scheme is currently underway and approximately 33,900 customers will be repaid a total of £8.4 million.

YBS agreed to settle at an early stage of the FCA investigation and therefore qualified for a 30% (stage 1) discount.

Notes to editors

  1. On 25 February 2014 the FCA published the findings of a thematic review of mortgage arrears handling, TR14/3 Mortgage lenders’ arrears management and forbearance.
  2. The final notice for YBS.
  3. YBS specialises in the provision of residential mortgages. It provides mortgages using the YBS, Barnsley Building Society, Chelsea Building Society and Norwich & Peterborough Building Society brand names, as well as ‘Accord Mortgages’, the brand name of Accord Mortgages Ltd, an intermediary-only mortgage provider (a lender which deals only through mortgage brokers) wholly owned by YBS.
  4. On 17 February 2014, YBS announced it would refund all mortgage fees, and accrued interest, charged to customers since 2009. It is expected that approximately 33,900 current and former customers will receive back an average of £247, at a total cost to YBS of £8.4 million. It has also ceased charging mortgage arrears fees until the identified issues are resolved.
  5. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  6. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  7. Find out more information about the FCA.