The FSA has fined Lloyds Banking Group £4.3m for systems and controls failings that saw 140,000 customers receive 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. Of these, up to 140,209 customers received payment after Lloyds’ stated timeframe of 28 days.
The FSA found Lloyds’ systems could not cope with the “very large” volumes of PPI redress payments.
The regulator says some payment problems arose because of manual processes without proper controls. The FSA cites one “particularly serious copy and paste error” from September 2011 which resulted in a “considerable number” of customers paid the wrong amount of redress.
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.
As at the end of September, Lloyds has incurred a total of £3.7bn in compensation for customers missold PPI.
Roxburgh Financial Management branch manager Garry Webb says: “Larger institutions that sold PPI in bulk will be looking at this Lloyds fine and taking a long hard look at their own redress procedures as a result.”