Barclays to pay £100m in loan error
Published 17/09/2013 | 13:06
About 300,000 Barclays customers are to get surprise windfalls of hundreds of pounds as a result of a £100 million paperwork error by the banking giant.
From next month affected customers will receive refunds of interest paid on personal loans - in some cases stretching back five years - with an average payout of more than £300.
Barclays, already under pressure for scandals involving rigging the Libor rate, loan mis-selling and alleged bungs to Qatari investors, admitted the blunder in its 185-page prospectus for a £5.8 billion cash call.
It blamed the error on minor technical issues with customers' statements and arrears notices, such as failing to properly record when someone changed a repayment date.
That left the bank in breach of the Consumer Credit Act (CCA), forcing it to refund any interest paid since the mistake was made.
Most of the customers entitled to the windfall were behind on loan payments, after borrowing sums of up to £25,000 to buy items such as engagement rings and cars.
The bank warned it may have made similar mistakes in its Barclaycard, Barclays Wealth and Barclays Corporate divisions - with an as-yet-unknown impact.
Barclays insisted there was no mis-selling involved, and added it is talking to the Office of Fair Trading (OFT) to draw up plans to refund customers as "swiftly and efficiently as possible".
A spokesman said: "Barclays has proactively reviewed information it has historically sent to its customers relating to interest charges where we have found technical documentary errors.
"As a result, Barclays has identified certain issues with the information contained in some statements and arrears notices relating to consumer loan accounts.
"Due to these notification errors, interest was not due on certain accounts during the period that Barclays made this mistake, and whilst no one has been mis-sold to, customers are entitled to have their interest payments returned. No customer will pay more than they were ever contractually expected to."
He added the bank will be in touch with affected customers, who do not need to do anything.
The errors stretch back as far as October 2008, when tougher regulations came into force. They came to light late last year when the bank was checking over old documents.
Northern Rock also fell foul of the CCA late last year, resulting in 152,000 former customers of the defunct bank being told they would receive average refunds of about £1,800 following a paperwork error.
Northern Rock said it would refund £270 million in interest after failing to include key details on loans in customers' statements - in some cases dating back to 2008.
The OFT refused to say whether it is in talks with any other banks about breaches of the CCA.
An OFT spokesman said it is "pleased that Barclays is taking steps to ensure that customers who have been disadvantaged are compensated".
He added: "We urge other lenders to make sure they are complying with their legal obligations under the Consumer Credit Act and take remedial action if necessary."
Barclays is also facing a £50 million fine from the Financial Conduct Authority (FCA), which has accused it of agreeing £322 million of secret payments to Middle Eastern investors to secure their support for cash calls totalling more than £5 billion at the height of the financial crisis.
Barclays, which contests the FCA's findings, said the fees relate to advisory services over five years.
It is also being probed by the Serious Fraud Office and regulators in the US, and admitted it does not know how much the final cost will be.