The Lloyds Banking Group (LBG) has been fined £4,315,000 by the Financial Services Authority (FSA) over failures that led to 140,000 customers receiving delayed redress for mis-sold Payment Protection Insurance.

LBG is made up of TSB Bank plc, Lloyds TSB Scotland and Bank of Scotland plc. The fine would have been £6,164,327 but the bank agreed to settle at an early stage so qualified for a 30% discount.

Over the ten months from May 2011 to March 2012, LBG issued 582,206 PPI complaint decision letters agreeing to pay them back. The FSA stipulates that this redress must be paid ‘promptly’ and LBG agreed to do so within 28 days.

But a series of failings in LBG’s systems meant that nearly a quarter of these were paid after the 28 day deadline and 87,000 had to wait over 45 days. Of these 56,000 had to wait over 60 days and 29,000 had to wait over 90 days. 8,800 of them had to wait over six months.

Then consider what happens when customers are even a day late with their payments!

Just over 4% of them (24,589) had their payments dropping out of the system altogether and were only caught after the customers chased them.

The problems at LBG regarding PPI redress payments identified by the FSA were:

  • Inadequate planning and processes as well as systems that were unable to deal with the volume of redress payments.
  • Insufficient knowledge and experience of the staff used to ensure that the process worked properly.
  • Ineffective or non-existent redress payments tracking.
  • The failure of LBG to monitor redress payments properly to ensure they were being made in a timely manner.
  • Ineffective risk management when preparing redress payments.
Lloyds TSB

Lloyds TSB

The FSA says that LBG has now conducted a thorough review of its processes to ensure those due payments receive the correct amount in the correct timescale.

In the FSA statement Tracey McDermott, the FSA’s director of enforcement and financial crime, said:

The industry let customers down badly in relation to the sale of PPI. The significant volume of complaints is a product of LBG’s own failings and the least customers can now expect is that redress, when it is due, will be paid promptly.”

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