THE Halifax is set to pay £500 million in compensation after it admitted confusing 600,000 customers about its standard variable-rate mortgage.
It has reached a voluntary agreement with City watchdog the Financial Services Authority to pay the money because wording in its mortgage documents could have baffled clients.
The issue affects people who took out a mortgage between September 2004 and September 2007, when the Halifax had its HQ in Trinity Road, Halifax.
It relates to the group’s decision to increase the limit on its standard variable-rate mortgage
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from 2per cent above the Bank of England rate to 3.
Wording in the offer sent to people taking out a mortgage during this period may have made customers think Halifax would contact them if it was increasing the cap on its SVR.
But in reality the group only had to contact customers who were paying the SVR on part of their mortgage, but also had another loan with the group which carried early redemption charges.
Although customers would have been informed that their mortgage repayments were changing, Halifax did not make it clear that part of the reason for this was because it was increasing the SVR cap by 1 per cent.
The issue was made more confusing by the Bank of England base rate falling rapidly during the period in which the cap was changed, meaning the amount people on SVRs were paying was changing monthly.
The Halifax, merged with Lloyds TSB to create Lloyds Banking Group in January 2009, will begin writing to the 600,000 customers from April.
It expects to make payments to around 300,000.
The money individuals will receive will be based on the difference between repayments if the SVR had been 2% above base rate and the 3% above base rate that it was charged at.
Lloyds Banking Group, which employs around 6,000 people in Calderdale, said: “Halifax is committed to operating with the highest levels of integrity and treating customers fairly and felt that a proactive co-ordinated programme to contact affected customers and make goodwill payments was the appropriate course.”