The lash up was the result of mortgage information being held on two separate unaligned systems, says the FSA, and problems with two further processes where manual updates were not always carried out.

The effect was that BOS relied on incorrect records for considerable periods of time between 2004 and 2011, says Tracey McDermott, FSA director of enforcement and financial crime.

"This breach is particularly serious because the inaccuracies built up over a period of seven years," she says. "There was no structure in place to identify errors as they occurred and no checking procedures thereafter."

The issue first came to light when BOS put in place a programme to rectify the fact that some Halifax customers had received confusing information about changes to their mortgage contracts, specifically relating to the standard variable rate. While monitoring a consumer forum website, the FSA found a number of customers complaining that they had been wrongly excluded from the programme and had not received goodwill payments.

Tthe problem was compounded when BOS incorrectly contacted 33,700 customers and mistakenly made goodwill payments totalling £20.4 million to 22,700 of them.

"These mistakes stemmed from the fact that Bank of Scotland had an inadequate mortgage records system meaning they could not identify which of those 250,000 customers were subject to a cap on their standard variable rate," says the FSA's McDermott. "In a complicated organisation where several legacy systems exist, firms have to make sure they are synchronised, otherwise it is their customers who suffer."