The West Brom is to refund a number of borrowers who historically were inadvertently charged too much interest when redeeming their mortgages.
An internal investigation conducted by the building society has identified a total of 7,669 borrowers who were charged interest up until the end of the month of redemption.
However, the terms and conditions applicable to their particular mortgage products did not support this position and therefore interest should only have been charged up until the date of redemption itself.
The majority of affected mortgages were originated directly through West Bromwich Building Society between 2004 and 2007. A small proportion relate to a period before 2004 where the mortgages were acquired by the Society’s specialist lending division, West Bromwich Mortgage Company.
Not all mortgages taken out between these dates are affected – just those with terms and conditions which state that interest will only be charged up until the date of redemption.
Those borrowers found to have been overcharged will be fully reimbursed this amount plus interest. The total amount set aside for reimbursements is £2m, a cost which has been provided for in the Society's accounts for the last financial year.
The West Brom immediately informed its regulator, the Financial Conduct Authority (FCA), on discovery of this issue. It has since shared full details of the outcome of its investigation and plans for repaying the borrowers.
The Society’s Chief Executive Jonathan Westhoff said: “As a building society we always act in the interests of our customers and their needs and rights are of paramount importance to us.
“Overcharges have stemmed from a historical error originating some ten years ago, which we uncovered while investigating a recent service enquiry. We sincerely apologise to those people who have been charged incorrectly and are responding swiftly to restore them to their original position.
“We hope this action clearly signals our commitment to doing the right thing by our customers and always rectifying situations for them where mistakes have occurred.”
What will happen next?
Affected borrowers will receive a letter apologising for the error and explaining how they will be reimbursed. These were issued on 24 June 2014 and refunds should be paid within 14 days of receipt of a letter.
Borrowers with a current West Brom mortgage will not be affected by this issue when they come to redeem. The Society will ensure interest is charged correctly, in accordance with the mortgage’s specific terms and conditions.
More information for borrowers