Bank of Scotland was yesterday fined £4.2m after shoddy record-keeping almost left 160,000 customers out of a compensation programme that also paid £20.4m to 22,700 customers who were not entitled to anything.
The problems in part was generated by IT systems that did not work together properly. The issue of incompatible IT systems has bedevilled the banking sector in recent months, causing misery to millions of customers.
The Financial Services Authority found that Bank of Scotland, the owner of Halifax and now part of Lloyds Banking Group, had held inaccurate records on 250,000 Halifax mortgage customers for more than seven years, from 2004 to 2011.
This meant that when Halifax was forced to contact customers with standard variable rate mortgages, who had been misled over caps on their interest rates last year, it failed to get hold of all the right people.
The foul-up was only discovered as a result of the watchdog's monitoring of consumer finance forums on which angry customers discussed their unhappiness. Many of them should have received goodwill payments, but had not been approached. When the FSA asked for more details from the bank, it was also discovered that 22,700 had been paid who need not have been.
In its final decision notice, the regulator said goodwill payments totalling £162m "may not have been received by customers, had their complaints not led to the identification of errors in the information held on BOS mortgage systems".
The FSA put part of the problem down to "manual error". But it identified two computer systems that were "not properly synchronised", leading to incorrect information being sent out to customers. With modern banks increasingly constructed by bolting together several smaller banks, the issue of systems not working together is becoming increasingly common, to the detriment of the consumer.
An even more serious problem occurred with Royal Bank of Scotland's payment systems over the summer. This led to thousands of customers being locked out of their accounts.
In the case of Ulster Bank customers in Northern Ireland, the problem lasted weeks because they had been left on an old system. The FSA was moved by this to write to bank bosses, warning them to take IT issues "seriously" and saying that they should ensure they had expertise devoted to it at "board level".
Royal Bank of Scotland saw its £1.7bn sale of 316 branches to the Spanish lender Santander fall apart just a week ago, and that was blamed in part on the trouble Santander had incorporating the RBS accounts into its IT systems.
Tracey McDermott, the FSA's head of enforcement, highlighted the issue of "legacy systems" in response to yesterday's fine of BoS She said: "This breach is particularly serious because the inaccuracies built up over a period of seven years. There was no structure in place to identify errors as they occurred and no checking procedures thereafter.
"In a complicated organisation where several legacy systems exist, firms have to make sure they are synchronised, otherwise it is their customers who suffer."
Bank of Scotland received a 30 per cent discount on the fine because it accepted the penalty and co-operated with the watchdog at an early stage.