Release Date: 11th June 2020

To access the original FCA document, click here.

Summary

The Financial Conduct Authority (FCA) has fined Lloyds Bank plc, Bank of Scotland plc, and The Mortgage Business plc a total of £64,046,800 for failures in handling mortgage customers in payment difficulties or arrears. These failures spanned from April 2011 to December 2015, impacting over a quarter of a million customers, some of whom were vulnerable. The banks have paid approximately £300 million in redress to affected customers, and this programme is nearly complete.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, stated, “Banks are required to treat customers fairly, even when those customers are in financial difficulties or are having trouble meeting their obligations.” He emphasised the banks’ failure to understand customer circumstances, leading to unfair treatment.

The FCA found that the banks’ systems and procedures for gathering information from customers in arrears were inadequate. Call handlers often did not obtain sufficient information to properly assess customers’ circumstances and affordability, resulting in unfair treatment. Additionally, a system setting a minimum percentage of payment acceptance created inflexibility, preventing appropriate payment arrangements. These issues were exacerbated by significant staff turnover, leaving call handlers inexperienced.

The FCA identified breaches of Principle 3 and Principle 6 of the FCA’s Principles for Businesses. Although the banks recognised some failings as early as 2011, their corrective measures were insufficient. A thematic review by the FCA in 2013 and subsequent follow-ups in 2014 and 2015 found persistent issues, leading to a Skilled Persons review.

The banks accepted the FCA’s findings, qualifying for a 30% discount on the fine, reducing it from £91,495,400. In July 2017, a group-wide customer redress scheme was implemented, refunding fees and interest accrued on broken payment arrangements, arrears management, and litigation fees. By November 2019, £259.9 million had been paid to customers.

Key Takeaways:

• Fair Treatment: Banks must treat all customers, including those in financial difficulties, fairly.
• Adequate Systems: Implement robust systems and procedures to gather sufficient customer information.
• Staff Training: Ensure staff are well-trained and experienced, particularly in collections and recoveries.
• Clear Communication: Clearly communicate options and consequences to customers.
• Proactive Redress: Promptly address and compensate for any failings.

In conclusion, the FCA’s fine on Lloyds Bank, Bank of Scotland, and The Mortgage Business emphasises the importance of fair treatment for customers in financial difficulty. Banks must ensure adequate systems, staff training, and clear communication to prevent similar failings.