The Yorkshire Building Society Group has pledged to refund nearly 34,000 customers that were charged mortgage arrears fees after the Financial Conduct Authority raised concerns that some clients had been charged incorrectly as a consequence of YBS' procedures not being robust enough.
In a FCA statement, YBS said it will voluntarily refund all administration fees for mortgage arrears since January 2009 to approximately 33,900 current and former customers, receiving an average of £247 (€302m, $404m) back in refunded fees.
Collectively, the refunds are worth £8.4m.
"The FCA has worked closely with YBS to get to the heart of this issue and ensure that customers are refunded what they are owed," said Clive Adamson, director of supervision at the FCA in a statement.
"We have been encouraged that they are now putting customers first by paying redress to everybody in arrears, not just those who were overcharged.
"But this is nonetheless a very important reminder that firms must take responsibility for any wrongdoing and make sure their customers get a fair deal."
The FCA raised concerns with YBS, which includes Yorkshire, Chelsea and Barnsley building societies, and Accord Mortgages, about their processes for dealing with mortgage customers who had fallen behind in their payments.
The watchdog added that YBS found that some of its customers in arrears may have been charged fees incorrectly as companies can only charge an administration fee when a mortgage account falls into arrears by two months or more to cover any administrative costs.
The FCA confirmed that the redress process will begin on 17 February and existing customers will have their mortgage account credited on 25 February.
It added that the refund process including letters to customers with details of the exercise will commence on 25 February 2014.
"To ensure people do not face lengthy delays and uncertainty in getting redress, YBS has agreed to refund all arrears administration fees charged since January 2009, plus interest on those fees," said the FCA.
"This means that borrowers who were charged correctly will also receive a refund."