Lloyds Bank plc, Bank of Scotland plc and The Mortgage Business plc, all part of the Lloyds Banking Group, have been fined by The Financial Conduct Authority (FCA) in relation to how they have handled customers in payment difficulties and arrears.
The three major banks have been issued with a fine of £64,046,800 between them with the banks claiming they will have paid around £300 million in redress, of which the programme is nearly complete.
Between April 2011 and December 2015 the banks were found to have been treating customers unfairly, including those who fell into the vulnerable category. The banks systems for collecting information from mortgage customers in payment difficulties were found to be inadequate. It was discovered that call handlers were not consistently obtaining the right information in order to assess a customers situation and affordability.
The banks were also found to have employed a system that meant a minimum percentage of a customer’s contractual monthly payment was set and call handlers were authorised to accept this without obtaining further permission from a senior colleague. The system created an inflexibility meaning call handlers may have failed to negotiate the appropriate payment arrangements for customers.
The FCA found that the banks had breached Principle 3 and Principle 6 of the FCA’s Principles for Businesses with some of the failings dating back as far as April 2011. The actions the banks took at the time to try and rectify the issues were deemed unsatisfactory.
The FCA continues to focus on the fair treatment of customers experiencing financial difficulties, with the economic issues brought by Covid-19 only adding to the importance of firms treating those customers who find themselves in financial difficulty fairly and appropriately. The FCA have emphasised the importance of firms investing in training the staff who work in collections and recoveries to ensure the highest standard of service is being met at all times.
For investors, the fines act as a reminder of the importance of keeping an eye on the operations of banks of every size. It’s crucial that investors ensure the operations and service procedures are robust and regularly monitored. Whilst many banks have adapted to the Covid-19 crisis, now more than ever it’s important for investors to ensure banks are offering the highest quality service and process.
Following an investigation, Lloyds has now repaid all payment arrangement fees, fees for falling behind on payments, and the interest accrued on the fees. All customers charged these particular fees during the period in question will be reimbursed, even though some of them may not have been pushed into financial difficulty. Lloyds says 526,000 customers have been refunded a collective £300million, of which the average payout was £350. The payout was a refund of fees and relevant interest, plus additional compensation in some cases.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Banks are required to treat customers fairly, even when those customers are in financial difficulties or are having trouble meeting their obligations. “By not sufficiently understanding their customers’ circumstances, the banks risked treating unfairly more than a quarter of a million customers in mortgage arrears, over several years.