News : Lloyds Hit by Record Fine over PPI Handling
London, UK, June 4, 2015 -- State-backed Lloyds Banking Group has been fined by the City watchdog for mis-handling payment protection insurance (PPI) complaints.
It is the latest fine imposed on the bank, in which the taxpayer still holds a 19% stake.
It comes just two months after Clydesdale Bank was fined for similar failings.
Earlier this week, the government said it would launch a Lloyds share sale to the public "in the next 12 months".
Last year, Lloyds was fined by the Financial Conduct Authority (FCA) and US regulators for its part in the rigging of international banking lending rates.
The latest fine relates to the way in which Lloyds advised its own complaint handlers to deal with customer demands for PPI refunds.
The FCA said the bank dealt with 2.3 million PPI mis-selling complaints between March 2012 and May 2013. Lloyds rejected 37% of those complaints out of hand.
Call centre staff in March 2012 were advised that the bank's sales processes were compliant with regulations and that they were to deal with complaints on this basis unless otherwise informed.
PPI is designed to help policyholders repay loans and credit card debts in the event of illness, accident, redundancy or death.
But it was mis-sold to millions of people. Policies often did not pay out when people needed help. Many sales staff did not explain PPI properly, for example to the self-employed or those with pre-existing medical conditions who would never be able to make a valid claim.
Compensation claims have led to an average payout for millions of people.
As a result, the FCA said "a significant number of customer complaints were unfairly rejected".
The mis-handling of complaints first came to light as a result of an undercover investigation by journalists from the Times newspaper, although the FCA was already investigating the bank over perceived failures in PPI complaint handling.
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Earlier this year, Lloyds said it had decided to freeze the release of shares in respect of deferred bonus awards from 2012 and 2013 for all members of its executive committee and for some other senior executives as a result of the FCA's investigation.
The bank said today that bonuses would be forfeited by those executives.
Customers do not need to take any action. Those who are affected and entitled to redress are being contacted directly. The FCA added that it was overseeing the remediation process.
Responding to the fine Mr Horta-Osorio said: "Whilst our intentions were right, we made mistakes in our handling of some PPI complaints. I am very sorry for this.
"We have been working hard with the FCA to ensure all customers receive appropriate redress. That process is now substantially complete. We remain fully committed to improving our operational procedures and ensuring we do the right thing for our customers."
Posted by Veronica Silva Cusi, news correspondent
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About Lloyds Banking Group:
Lloyds Banking Group plc is a major British financial institution formed through the acquisition of HBOS by Lloyds TSB in 2009.
Published: Monday, June 8, 2015