The financial regulator has fined Lloyds Bank and two of its subsidiaries more than £64m for historic failures in its dealing with customers who struggled to pay their mortgage.
In an update today (June 11) the Financial Conduct Authority said Lloyds, Bank of Scotland and The Mortgage Business had potentially unfairly treated more than a quarter of a million borrowers in mortgage arrears, including vulnerable customers.
The multi-million pound fine comes as the regulator promised to continue to monitor how banks treat customers experiencing financial difficulty in a bid to boost standards in the sector.
The FCA found the bank had inadequate processes in place between 2011 and 2015 to fairly treat those borrowers struggling to make mortgage payments, including an "inflexible" approach to negotiating payment arrangements.
The three banks have already moved to compensate customers failed by the shortcomings and a redress scheme launched in 2017 is now almost complete.
Redress payments totalling £300m have been paid to about 526,000 customers, including refunds for broken payment arrangement fees, arrears management fees and any accrued interest and unfair litigation fees.
Mark Steward, executive director of enforcement and market oversight at the FCA, said banks were still required to treat customers fairly even when they were in financial difficulties or struggling to meet their payment obligations.
Mr Steward added: "By not sufficiently understanding their customers’ circumstances the banks risked treating unfairly more than a quarter of a million customers in mortgage arrears, over several years. In some cases, customers were treated unfairly, including vulnerable customers.
"Customers should still pay what is owed, but banks are obliged to treat their customers fairly when making new payment arrangements.
"Firms should take notice of the action we have taken today to ensure that their own treatment of customers meets our expectations."
Because Lloyds and its subsidiaries accepted the FCA's findings they qualified for a 30 per cent penalty discount, otherwise the fine would have totalled more than £91m.
The City watchdog said the banks had "proactively contacted" all borrowers believed to be due compensation but urged any customer who had not been contacted and could have been affected to get in touch with their bank.
rachel.mortimer@ft.com
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