The lender has admitted that wording used to summarise the Halifax SVR cap in all Halifax mortgage offers between 2004 and 2007 could have confused customers.
The SVR cap only applied to customers with an early repayment charge (ERC) on their mortgage. Halifax increased the cap from 2% to 3% above base rate in October 2008 and wrote to affected customers.
However, customers that thought the cap applied to them when it did not did not receive a letter. With base rate falling at this time, Halifax’s SVR ended up more than 2% above base rate in January 2009, leaving some customers paying more than they thought they should.
Lloyds will now write directly to 600,000 Halifax customers in April in order to let them know about the redress programme and clarify what the SVR cap is and how it affects them.
It estimates that 300,000 customers will receive goodwill payments as a result.
A Lloyds spokesperson confirmed that it has received less than 50 customer complaints on whether the SVR cap applied to them: “We acknowledge that there was the potential for confusion and worked with the regulator to come to a conclusion.”
The £500m set aside for the programme will cover all costs to the lender, including the cost of contacting customers and goodwill payments.
The contact and redress programme relates specifically customers who were made mortgage offers by the Bank of Scotland under the Halifax brand between 20 September 2004 and 16 September 2007 and still held that mortgage in January 2009.
The summary of the cap was included in all mortgage offers until September 2007 when it was removed in line with regulatory guidance.
Lloyds will pay customers on SVR with an ERC, who were informed of the change, a flat fee of £250 in acknowledgement of the potential confusion.
Customers on SVR without an ERC, but who believed that the cap applied to them, will receive payment for the difference in cost between the 2% and 3% cap rate.
The payment will come off the balance of customers’ mortgages, although customers can contact Lloyds if they prefer a cash payment.
In a statement to the London Stock Exchange on the redress programme, LBG said: “The group is committed to running its business with the highest levels of integrity and treating its customers fairly and therefore believes that a proactive, co-ordinated programme to identify affected customers and make goodwill payments is the appropriate course of action.”
An FSA spokesperson said the voluntary agreement had been reached as part of its ongoing supervision of Lloyds.
The Bank of Scotland has now applied for a Voluntary Variation of Permission (VVOP) in order to carry out the customer review and contact programme.
