Almost 30,000 mortgage customers with Santander UK could be in line for compensation after the lender did not make it clear enough that they were free to move elsewhere.
The errors were made more than four years ago and those affected were former Abbey customers, who were placed on single variable rate (SVR) mortgages after their introductory deals ended.
The Spanish-owned bank, which is the country’s second-largest mortgage provider, has a £232 million pot in place to deal with this and other issues.
The mistakes happened around December 2008, when the Bank of England cut interest rates by one percentage point. Instead of passing the full drop on, Santander lowered its rate by half a percentage point. It should have made it clear to customers that they were free to leave without penalty and look for a better deal elsewhere.
The City’s new watchdog, the Financial Conduct Authority, said: “The letters it sent were not clear so borrowers may not have understood what was going to happen, how this was going to affect them and the options open to them. Some borrowers did not receive a letter at all.”
Santander is writing to more than 270,000 customers to explain what happened more clearly to them. The letters will be sent out in batches until autumn this year and they will tell customers how to complain if they feel they have lost out.
The bank said the majority of mortgage customers will not have been worse off financially as a result of any lack of clarity in the original communication in December 2008. However, it is thought that around 30,000 customers will receive some compensation.