NATIONWIDE said it regrets having a clause to allow buy-to-let landlords to refuse renters claiming benefits.

The Swindon-based building society, the largest in the UK, was among major lenders to be hauled in front of the work and pensions select committee in April.

The committee wrote to a number of mortgage lenders to warn them of discriminatory DSS clauses which allow a landlord or letting agent borrowing from them to say they won’t rent to someone on housing benefit.

The term has passed into colloquial use and stands for Department for Social Security, which no longer exists.

The committee heard from witnesses, including tenants and landlords, and the housing charity Shelter, about the struggle they faced in the housing sector.

Paul Wootton, director of home propositions at Nationwide, said: “In the last seven years Nationwide has not had any formal policy that would discriminate against tenants on benefits.

“It was only for a three-month period where unfortunately we had that clause in our contract, we have never enforced that clause, and will never enforce it. We are quite passionate about having a private rental sector that works for all involved.

“This review has prompted us to identify that there was this three-month window which we regret, and as such we have written to those landlords to confirm to them that we would never enforce such a term.

He added: “We have also taken steps to review some of the very fine details of some of the mortgages that we acquired during the financial crisis."

Nationwide has consequently written to around 12,000 mortgage customers, including customers it took over when it bailed out the Derbyshire and Cheshire Building Societies during the 2008/9 financial crisis, to reassure them that it would not enforce the policy.

NatWest caved in to mounting industry pressure last month to lift restrictions on buy-to-let landlords renting to DSS tenants.

It came under attack in October after the bank told a landlord she would have to evict her tenant of two years, after a blanket ban by the bank on benefit claimants.