Co-op to compensate for Platform and Optimum errors
The Co-op recently discovered a flaw in its systems which meant that Platform and Optimum customers were only charged interest on their first payment – meaning that further payments were higher than they should be.
Customers who took out Platform and Optimum mortgages have not yet been notified by the bank and the scale of the issue remains unclear.
The troubled lender made its admission as it revealed that a series of failings are likely to cost it up to a £105m more than previously expected.
The errors include not only the interest error but payment protection insurance issues and higher than anticipated costs from arrears.
In a statement the Co-op said: “The bank’s estimates of existing provisions relating to customer redress have been revised, with these revisions relating primarily to a change in assumptions regarding the future costs of PPI redress, arrears charges and the processing of certain mortgage interest ‘first payments’.”
The bank has also said it had made an additional provision in relation to “the cost of customer redress that will be required following the identification of a technical breach of the Consumer Credit Act”.
The Co-op was thought to be in the middle of a rescue plan after a £1.5bn black hole was discovered in its balance sheet.
However reports have surfaced today that the Co-operative Group has agreed to cede control of its banking arm to creditors after bondholders rejected a rescue plan.
The Telegraph reported that a deal had been agreed in principle that will ensure the lender survives but will leave the Co-op with only a minority stake in its subsidiary.