Bank of Scotland fined £3.5m for poor complaints handling FSA orders bank to pay £17m compensation

25 May 2011

Bank of Scotland fined

Many elderly customers had their complaints rejected by Bank of Scotland

Bank of Scotland (BOS) has been slapped with a £3.5m fine for the mishandling of complaints about its sale of investment products.

The bank was criticised by the Financial Services Authority (FSA) for misselling investments and subsequently not dealing with the complaints from many older customers, who had little or no experience of investment products.

Bank of Scotland: bad complaints handling

Between 30 July 2007 and 31 October 2009, BOS received 2,592 complaints about its sales of the Collective Investment Plan, Personal Investment Plan, Guaranteed Growth Bond, ISA Investor and Guaranteed Investment Plan.

The FSA’s investigation found that BOS wrongly rejected a significant number of these complaints, and that as many as 45% of the complaints it had handled should have been upheld rather than rejected. It also found that 77% of these bank complaints came from inexperienced customers and 55% were aged over 60 years old.

The bank has agreed to review 8,614 rejected complaints relating to investment advice given from February 2004 to the end of 2009. This comes after Barclays was given with a record £7.7m for misselling 'cautious' investments to 12,000 of its customers. 

Poor investment products on sale

The FSA found serious problems with the way the BOS assessed the suitability of investment products for its customers. It raised issues about poor risk assessment tools, which led to customers being missold products that were not appropriate for the levels of risk they wanted, or could, take.

We had a look at one of the products BOS was selling at the time. We believe its Guaranteed Investment Plan may have been too complex for the inexperienced investors it was potentially sold to.

It introduces features like multiple valuation guarantee dates, money back guarantees and a complicated investment proposition combining money market and share/fixed interest investments that, we believe, could potentially be difficult for inexperienced investors to understand.

Which? says

As the FSA fined BOS for the mishandling of complaints about retail investment products, Which? chief executive Peter Vicary-Smith said: 'Not only was Bank of Scotland mis-selling investment products to vulnerable consumers then unfairly rejecting their complaints, it was doing so whilst being bailed out by the taxpayer.

'This case reaffirms the need for a fundamental overhaul to the way the banking industry deals with complaints and illustrates why the Financial Ombudsman Service is so essential. The Government must resist any pressure from the banking industry to weaken it.'

If you have a problem with your bank, take a look at our guide to making a complaint

pound coins

Which? Money when you need it

You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.

Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.

Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast

For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.