The UK's financial landscape is bracing for a significant regulatory intervention as the Financial Conduct Authority (FCA) prepares to levy heavy fines against two of Britain's banking giants: Barclays and Bank of Scotland.
The core of the issue lies in the contentious practice of 'price walking', where lenders offer far more attractive mortgage deals to new customers while leaving their existing, loyal borrowers on significantly higher Standard Variable Rates (SVRs). The FCA's investigation has found that both banks failed to provide these existing customers with the same competitive options, a breach of the regulator's overarching 'Consumer Duty' principle.
Loyalty Penalty: The Heart of the Scandal
For years, a huge number of homeowners who did not actively switch deals at the end of their fixed-term or tracker rate periods were automatically moved onto their lender's expensive SVR. This created a two-tier system where savvy new customers enjoyed low rates, while loyal, long-standing customers effectively paid a 'loyalty penalty'.
The FCA's new rules, designed to eradicate this unfair practice, mandate that lenders must offer existing borrowers the same products they would offer a new customer with a similar risk profile. Barclays and Bank of Scotland are now facing the music for their failure to adequately implement these changes.
Scale of the Impact and Forthcoming Redress
While the exact figures of the fines are still under negotiation with the FCA, the sums are expected to be substantial. More importantly, the banks will be forced to undertake a major redress scheme.
This means thousands of affected customers who were overcharged on their mortgage payments can expect to receive compensation. The process will involve the banks identifying every customer who was not offered the right deal and calculating the difference they paid compared to what they should have been offered.
A Warning to the Entire Banking Sector
This action sends an unequivocal message from the City watchdog. The era of exploiting customer inertia is over. The FCA's Consumer Duty places a higher burden on firms to act in good faith and deliver fair value to all customers, not just new ones.
For borrowers, this underscores the critical importance of reviewing your mortgage deal regularly. However, it also offers reassurance that the regulator is actively working to ensure the market operates fairly, protecting consumers from hidden penalties and complex, unfair pricing structures.
