Co-Operative Bank today 'terminated' Capita's outsourcing contract years before it was due to expire

Services ops for mortgages to go back in-house, says High Street lender, can't say how many to TUPE across

Co-Operative Bank is terminating its outsourcing contract with Capita years ahead of schedule and is planning to TUPE across staff to provision services in-house again, ending what at times was a fractious relationship.

A six-year agreement for Capita to run the Bank's mortgage services operation was signed in 2015 worth £325m, it included handling customer queries and applications and mortgage maturity, as well as digitising processes.

Yet the following year the companies fell out, with Co-Operative Bank threatening litigation over alleged failings regarding digital transformation service delivery.

At the time, September 2016, Capita told the London Stock Exchange:

"[W]e are in a contractual dispute with the Co-op Bank regarding obligations relating to the transformation of services. The ongoing mortgage processing being undertaken by Capita is performing well. However, there is a risk of litigation in respect of the transformation."

The differences were resolved in 2017 and by 2019 a contract was renewed for six years more.

Fast-forward to today and the Bank said that after three consecutive quarters of profit it will "integrate" the "mortgage servicing operation back into its business during 2022."

"The Bank and Capita will jointly deliver an exit plan which retains colleagues that support the Bank’s mortgage customers, providing consistency of service," it added.

A spokesperson at the Co-Operative Bank told The Reg it will be a 12-month process to "transition everything in the smoothest way possible." She said staff will be brought back under TUPE but refused to confirm the number returning. "We hope to bring over as many as possible."

Around 740 Capita staff had worked on the mortgage services team in 2019 when the current deal was agreed.

Co-Operative Bank clearly wants to leave on good terms, saying that working with Capita had been a "positive experience" and "we'd explore opportunities to work with them again in the future."

The last decade included some testing years for the Co-Operative Bank: in 2013 it discovered a £1.5bn black hole in the balance sheet caused by defaulted loans and the merger with Britannia Building Society.

In response the Bank decided to close 15 per cent of branches, trim the workforce, and set aside £500m to update IT systems following "historical underinvestment."

Capita said today it had "received notice of termination" of the agreement with the Bank, which had been scheduled to run until November 2025.

Lewis issued a statement:

"[W]e are proud that they have acknowledged the high levels of service that we have delivered to them and their customers, in particular throughout the pandemic. We understand their decision to integrate the service back into the Bank as part of their strategic plan and we look forward to exploring opportunities to work together in the future." ®

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