State-backed Lloyds Banking Group has been fined a record £117 million for failing to fairly handle payment protection insurance (PPI) complaints.
The fine relates to a period from March 2012 to May 2013 when the group assessed customer complaints about over 2.3 million PPI policies and rejected 37% of those – many of them wrongly.
The fine is the largest ever retail banking penalty imposed by the Financial Conduct Authority (FCA).
Other larger charges have related to trading scandals such as Libor rate-rigging and foreign exchange rate manipulation.
Between January 2011 and March 2015 a total of £19.2bn has been paid in PPI compensation. By the end of 2014 Lloyds had contributed to over half of this, with £12.025bn paid out in compensation.
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PPI claims not fully investigated
The FCA found that in March 2012, Lloyds issued guidance to complaint handlers that its overriding principle when assessing complaints should be that PPI sales processes ‘were compliant and robust unless told otherwise’.
This resulted in some of them dismissing customers’ personal accounts of what had happened to them during the PPI sale.
In addition, Lloyds did not notify complaint handlers of known failings that had been identified in its PPI sales process.
Some customers were told that their complaint had been ‘fully investigated’ when this was not the case.
Complaints must be treated fairly
Which? executive director Richard Lloyd said: ‘It’s unacceptable that Lloyds continuously let its customers down by failing to resolve legitimate complaints quickly and fairly.
‘Today’s fine should be a red flag for any banks that are stopping people getting back money they’re rightly owed. The regulator must continue to force banks to change their culture so failings like this aren’t repeated.’
Georgina Philippou, acting director of enforcement and market oversight at the FCA said: ‘PPI complaint handling is a high priority issue for the FCA.
‘If trust in financial services is going to be restored following the widespread mis-selling of PPI, then customers need to be confident that their complaints will be treated fairly.
Those affected will be contacted
Lloyds has launched a programme to re-review or automatically uphold around 1.2 million PPI complaints and set aside a total of £710 million to cover any redress due to affected customers.
Customers who are affected will be contacted directly. The group said that following its review, 90% of customers received payment and the remainder will be completed by the end of June.
Lloyds, which remains nearly 19% owned by the taxpayer after being rescued during the financial crisis, has already set aside £12 billion to cover the cost of compensating those mis-sold PPI.