Santander is to contact over 270,000 mortgage customers amid claims that it misled or failed to inform them about a rise in the cap on its standard variable mortgage five years ago.
Under decree from new City regulator, the Financial Conduct Authority (FCA), Santander will write to customers later this month explaining what happened to the cap on its variable mortgage rate back in 2008 and inviting customers to register a complaint if they believe that they have lost out as a result.
The cap on a standard variable mortgage rate is a maximum limit to which a lender can raise a standard rate when an introductory or fixed-rate deal ends.
Santander increased its cap in 2008 from 2.5% plus the Bank of England base rate to 3.75% plus the base rate.
But the bank’s communications issued to customers about the cap increase were deemed inadequate by previous regulator, the Financial Services Authority.
And with the new regulator now pursuing the case, it is thought that as many as one in nine – up to 30,000 customers – could be eligible for thousands of pounds in compensation.
The letters were confusing, the new regulator decided, while some customers received no notification of the changes at all.
"When Santander raised the cap it should have given affected borrowers clear information in easy to understand terms,” the FCA said.
Rate Increases / Bank of Ireland
Santander was criticised last year for raising its standard variable rate by half a percentage point to 4.74%, despite the launch of the Funding for Lending Scheme, which was designed to make mortgage rates cheaper.
The Bank of Ireland is also currently under review after announcing huge rises in its mortgage rates.
The bank is set to more than double its tracker mortgage rates this year, despite a sustained record-low base rate of 0.5%.
The move could cost 13,000 customers thousands of pounds extra on their mortgage payments each year (read more).
The chairman of the Treasury Select Committee, Andrew Tyrie, has asked the FCA to investigate further after his first demand to the now-defunct regulator did not receive a satisfactory response.
Treasury Select Committee chairman, Andrew Tyrie, challenges the City regulator to act more decisively over the Bank of Ireland's huge mortgage rate hikes (read more).
Earlier this month, Adam Phillips, chair of the Financial Services Consumer Panel, called for "an era of effective consumer protection."
While are signs that the FCA is getting to grips with some of the administrative failings that have caused customers to be misled, there is more to be done to ensure that such an 'era' begins on the right grounds.
Keith McDonald
Which4U Editor
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