The FSA has fined Lloyds Banking Group a total of £4.3m for systems and controls failings that led up to 140,000 customers receiving delayed redress for missold payment protection insurance.
The fine is the combined penalty for failings by Lloyds subsidiaries Lloyds TSB Bank, Lloyds TSB Scotland and Bank of Scotland.
Between May 2011 and March 2012, Lloyds sent 582,206 decision letters to PPI complainants agreeing to pay redress to them. FSA rules state redress must be paid promptly and Lloyds aimed to make payment within 28 days of the decision letters.
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 six months. Of the total, 24,589 payments dropped out of the process, and some were only identified after customers called to chase outstanding redress payments or went to the media to highlight their case.
The FSA found Lloyds did not plan well enough in preparing redress payments for customers missold PPI, and that the bank’s systems could not cope with the “very large” volumes of PPI redress payments.
Lloyds was also unable to fast-track redress to PPI customers after they called to chase this with the bank. The FSA also says there was ineffective tracking of redress payments and Lloyd’s approach to risk management when preparing the payments was also ineffective.
Lloyds has since reviewed its PPI redress payments system, and in some cases has paid interest of 8 per cent a year on outstanding redress payments.
FSA director of enforcement and financial crime Tracey McDermott says: “The industry let customers down badly in relation to the sale of PPI. The significant volume of complaints is a product of Lloyds’ own failings and the least customers can now expect is that redress, when it is due, will be paid promptly.
“In short, Lloyds’ 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.”
A spokesman for Lloyds says: “We did not fully anticipate the volume of complaints to be processed at the outset and experienced some administrative errors as we scaled up our systems and processes. We acknowledge this led to some customers not being compensated on time and we apologise to those customers whose payments were delayed.
“It is important to note that almost all customers who were due redress during the review period have now been paid in full and, as the FSA notes, we have taken steps to ensure customers have not been financially disadvantaged.”