he FSA has fined Bank of Scotland £3.5m for poor complaint-handling relating to investment advice spanning over two years, as the bank faces a total compensation bill of over £17m.
Bank of Scotland, part of Lloyds Banking Group, has already paid £2.4m in compensation to customers after it originally rejected their complaints but later upheld following an internal review.
The bank is facing a further compensation bill of around £15m.
Between July 30, 2007 and October 31, 2009, Bank of Scotland received 2,592 complaints about advice to take out the bank’s collective investment plan, personal investment plan, guaranteed growth bond, Isa investor and guaranteed investment plan.
In mid 2009, the regulator carried out a review of complaint-handling within Bank of Scotland as part of a wider review of complaint-handling by major banks.
At the same time, Bank of Scotland carried out its own review of 275 investment complaints that it had originally rejected and which had not been subsequently referred to the Financial Ombudsman Service.
Bank of Scotland decided to uphold 45 per cent of the rejected cases in the sample and has committed to review all the retail investment complaints it rejected between February 1, 2004 and December 31, 2009.
The bank will also review its investment sales to 8,000 customers who were classed as having a cautious attitude to risk between July 30, 2007 and March 1, 2010.
In its final notice, published last week, the FSA noted that customers’ attitude to risk had been partly determined by the use of a risk-profiling tool. It says a lack of adequate documentation about the discussions prompted by the tool meant that Bank of Scotland was not able to properly assess complaints.
FSA acting director of enforcement and financial crime Tracey McDermott says: “This fine reflects Bank of Scotland’s serious failure to treat vulnerable customers fairly.”
Bank of Scotland risk director Ray Milne says: “We have fallen short of the high standards of service our customers should be able to expect of us.”