Connect to share and comment
LONDON (Reuters) - Santander could pay out tens of millions of pounds in compensation to some 30,000 UK borrowers for failing to explain clearly changes in interest rates on their mortgages.
The Financial Conduct Authority (FCA), launched this month to protect consumers more effectively than its predecessor, said Santander UK must contact 270,000 customers about information it gave them before increasing the cap on its mortgage standard variable rate (SVR) in 2008.
The FCA said only a minority of the borrowers would be entitled to compensation. Redress would depend largely on whether they could have moved to a better deal.
Santander UK, part of Spain's Santander, said it set aside 232 million pounds last year for several issues including compensation for mis-selling interest rate swaps and products sold through a card protection partnership deal.
A spokesman said the bank was confident it had set aside enough for the likely payouts but declined to give a figure.
The spokesman said about 30,000 mortgage customers could have a case for compensation, based on the structure of their loan and because they were not told they could have repaid without incurring a charge.
A cap is the upper limit to which a lender can increase its SVR, the rate of interest borrowers move on to after an introductory deal comes to an end. In December 2008 the Bank of England cut base interest rates by 1 percentage point, but Santander only reduced its SVR by 0.5 percent.
Lloyds paid out about 500 million pounds to compensate about 300,000 customers in 2011 when it failed to tell them clearly enough about a change to the cap on its mortgage rate.
The FCA said letters Santander UK sent were not clear and that borrowers may not have understood what was going to happen, how it would affect them and the options open to them. It said some borrowers did not even receive a letter.
(Reporting by Steve Slater; Editing by David Cowell)