Lloyds Banking Group has been fined £4.3 million by the Financial Services Authority (FSA), after up to 140,000 customers had to wait for longer than 28 days to receive their compensation for mis-sold payment protection insurance (PPI).
The FSA found that Lloyds had failed to establish an adequate process for preparing redress payments to send to PPI complainants who banked with Lloyds TSB, Lloyds TSB Scotland and Bank of Scotland.
Lloyds PPI fine – customers left waiting
Between May 2011 and March 2012, Lloyds Banking Group sent 582,206 decision letters to PPI complainants agreeing to pay compensation to them. The average redress paid for consumers with a PPI complaint against Lloyds was £2,733.
FSA rules state that redress must be paid promptly, and Lloyds aimed to make payments within 28 days of these decision letters. However, a series of failures at Lloyds meant that not all customers received compensation within this time frame.
In nearly a quarter of cases (around 140,000), it took longer than 28 days for customers to receive compensation. Around 87,000 customers had to wait over 45 days, 56,000 over 60 days, and 29,000 over 90 days. Some 8,800 customers experienced a delay of over six months.
Over 24,000 cases inadvertently dropped out of Lloyds’ PPI redress payments process and required remedial action to ensure payments were made. The FSA also found that a ‘considerable number’ of people had been paid the wrong amount of redress.
Lloyds’ PPI fine – poor handling of problem
Following these errors, Lloyds was unable to deal with calls from customers querying the redress payment and a number of the calls were abandoned before being answered. Lloyds was unable to fast-track payments to customers, inform them when payment would be made, or explain why it had been delayed.
Lloyds Banking Group has since completed a comprehensive review of PPI redress payments to ensure that all customers expecting compensation have been paid the correct amount and have been compensated for any delay.
Which? executive director Richard Lloyd said: ‘Banks must deal with complaints quickly and fairly and help consumers claim back the compensation they are rightly due without hassle. We want to see the FSA continue to take action against any firm dragging its feet settling complaints. Banks need to proactively contact PPI customers without delay.’