The Financial Conduct Authority has issued its largest ever retail fine of £117m to Lloyds Bank, Bank of Scotland and Lloyds brand Black Horse for failing to treat their customers fairly when handling payment protection insurance complaints between March 2012 and May 2013.
During this period Lloyds Banking Group’s companies assessed customer complaints relating to more than 2.3m PPI policies and rejected 37 per cent of those complaints.
In March 2012, Lloyds issued guidance instructing complaint handlers that the overriding principle when assessing complaints was that PPI sales’ processes were compliant and robust unless told otherwise.
In addition, Lloyds did not notify complaint handlers of known failings identified in its PPI sales processes during the relevant period, the FCA said.
Some complaint handlers relied on this principle to dismiss customers’ accounts of what had happened during the PPI sale or to not fully investigate complaints. As a result, a significant number of customer complaints were “unfairly rejected”, the regulator said.
Georgina Philippou, acting director of enforcement and market oversight at the FCA, explained that the size of today’s fine reflects the fact that so many complaints were mishandled by Lloyds.
“Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds’ conduct was unacceptable.”
As a result of a substantial decline in the proportion of complaints upheld between March 2012 and October 2012, previous regulator the Financial Services Authority began investigating the way Lloyds was handling PPI complaints.
Following this intervention, Lloyds removed the overriding principle from its PPI complaint assessment process and provided information on all sales process failings to complaint handlers.
Since then Lloyds has made “significant progress” towards the fairer treatment of customers in its general complaint handling operation and has established an extensive remediation programme to re-review or automatically uphold approximately 1.2m PPI complaints.
The banking group has set aside a total of £710m to cover any redress due to affected customers.
In a statement this morning (5 June), the group apologised for the impact on those customers affected and accepted that part of the complaint handling process led to a failure to provide fair outcomes for a significant number.
Lord Blackwell, chairman of the Lloyds Banking Group, said: “We are trying to get it right for our customers and to rebuild trust. But we do not get everything right. That means when we make mistakes, we will take responsibility for them; this is what we have done here.”
Lloyds announced in February that it would freeze the release of shares in respect of deferred bonus awards from 2012 and 2013 for all members of the group executive committee and for some other senior executives as a result of the FCA’s enforcement investigation.
Lloyds agreed to settle at an early stage of the investigation and therefore qualified for a 30 per cent discount. Were it not for this, the FCA would have imposed a fine of £167.7m.
peter.walker@ft.com
