London Metropolitan University has been fined £5.9m by for over-recruiting more than 1,500 students than it was allowed to.
The university has been ordered to pay the amount by the Higher Education Funding Council for England (HEFCE) after the council discovered London Met had exceeded its allocation of students by 1,550 places for the 2011-12 academic year.
For the past two years, the HEFCE has asked university to submit their student figures in order to implement a Student Number Control (SNC). The control is in place to deter universities from admitting too many students.
An expert from the Higher Education (HE) sector, who wanted to remain anonymous, said most universities over-recruited to compensate for students who failed to take up their places at institutions. Although he told The Huffington Post UK there was no theory to working out how many students to recruit, he added the numbers of over-recruited students would be unlikely to reach the thousands.
The Times Higher Education reported the number of extra students may be as many as 25,000 across the sector, a huge increase on last year when figures reached 2,150 places. It added some universities might have deliberately over-recruited deliberately to compensate for the predicted decrease in applications when the higher fees set in.
University staff were alerted to the problem by vice chancellor Malcolm Gillies, who sent an email saying there had been "unprecedented demand" for places due to the planned tuition fee hike.
"Part of the reason for [the over-recruiting] was the radically different conversion rates, the high percentage of our intake coming through clearing, and the various intake tracks, some of which are slow for students without pre-existing admissions records.
"But the University does still need to make real advances in improving on its predictive capacity, in connecting up the half-dozen admission processes, and in decision-making on when to reject offers, or even rescind those already made. This is something we are not used to doing at London Met."
Technically, the university will not be paying a "fine", it will be returning the money provided by the government for the students, as the government does not necessarily provide funds for every extra student admitted over the cap.
Gillies said the university would be receiving more tuition fees due to the extra number of students, which would contribute towards paying the fine.
The university's fine is more than twice the highest fine imposed by the HEFCE last year; South Bank University was ordered to pay back £2.2m to the council.
A spokesperson from the HEFCE said for the first year the council introduced the system many universities may not have realised or fully understood the new instructions.
The government said the process of universities over-recruiting is putting extra pressure on precious finances because of the cost of supporting students with loans and bursaries.
The HEFCE will release a full list of universities which are facing fines in March.