Lloyds Banking Group has reached a voluntary agreement with the Financial Services Authority and is to undertake a customer review and redress programme in relation to a number of its Halifax mortgage contracts.
This specifically relates to some Halifax mortgage customers, where the wording in the mortgage offer documents had the potential to cause confusion.
This proactive agreement follows conversations between Lloyds Banking Group and the FSA to address this potential confusion.
The relevant mortgages were written during 2004 – 2007 by Bank of Scotland under the Halifax brand, and through the contact programme, goodwill payments will be made to affected customers.
Lloyds Banking Group is making a provision of £500m in relation to the contact programme.
The contact programme specifically relates to Halifax customers who were sent a mortgage offer between September 20 2004 and September 16 2007 and still held that mortgage in January 2009.
The potential confusion is in regard to wording found in the mortgage offer document which summarises the Halifax SVR cap.
Halifax will write to approximately 600,000 customers from April 2011. Customers do not need to take any action. Halifax will proactively contact all customers included in this programme.
Through this contact programme Halifax expects to make goodwill payments to approximately 300,000 customers – half of those within the contact programme.
Halifax says it 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 of action.
The Halifax Standard Variable Rate cap applies to borrowing based on SVR, where an early repayment charge is also present. This was in mortgage conditions until September 16 2007.
• Between September 20 2004 and September 16 2007 a cap summary was set out in offer documents in addition to terms and conditions.
• In line with regulatory guidance at the time, the SVR cap was removed from terms and conditions in September 2007.
• The SVR cap was originally set at 2% above BBR. Terms and conditions detailed that the cap level could change.
• Halifax says as a result of extenuating economic circumstances, Halifax varied the SVR cap in October 2008. The cap was duly amended from 2% above Bank of England Base Rate to 3% above Bank of England Base Rate.
This change only impacted customers once the SVR margin rose above 2% in January 2009, after the December Bank of England base rate change.