The FSA has fined three Lloyds Banking Group firms a total of £4,315,000 for failings in their systems and controls that resulted in up to 140,000 customers receiving delayed payment protection insurance redress.
The three firms are Lloyds TSB Bank Plc, Lloyds TSB Scotland Plc and Bank of Scotland plc (together, LBG).
Between May 2011 and March 2012, LBG sent 582,206 decision letters to PPI complainants agreeing to pay redress to them. FSA rules state that redress must be paid promptly and, in line with that, LBG aimed to make payment within 28 days of these decision letters. However, a series of failures at LBG meant that not all customers were paid redress within that time frame.
Up to 140,209 customers – nearly a quarter – received payment after 28 days. Around 87,000 customers had to wait over 45 days, 56,000 over 60 days, 29,000 over 90 days and 8,800 over 6 months. Of the total, 24,589 payments inadvertently dropped out of the process and LBG had to take action to ensure the payments were made. The payments were identified as a result of customers calling to chase payment and media attention.
Further, when customers telephoned LBG to enquire about the non-receipt of expected PPI redress payments, deficiencies in its process meant LBG was unable to fast-track the payment to the customer, inform them when payment would be made, or explain why it had been delayed.
Tracey McDermott, the FSA’s director of enforcement and financial crime, said:
“The industry let customers down badly in relation to the sale of PPI. The significant volume of complaints is a product of LBG’s own failings and the least customers can now expect is that redress, when it is due, will be paid promptly.
“In short, LBG’s PPI redress payment systems fell well below the standard the FSA expects, and the size of this fine reflects how seriously we view these breaches. All regulated firms must treat those who complain fairly and that includes paying redress promptly when it is due.
“PPI is an area of continuing focus for the FSA and we continue to monitor how firms handle complaints and pay redress.”
LBG agreed to settle with the FSA at an early stage of the investigation and therefore qualified for a 30% discount. Without the discount LBG would have been fined £6,164,327.