Release Date: 15th February 2013
To access the original FSA document, click here.
Summary
Lloyds Banking Group (LBG), including Lloyds TSB Bank Plc, Lloyds TSB Scotland Plc, and Bank of Scotland plc, was fined £4,315,000 by the Financial Services Authority (FSA) for failing to promptly pay redress to customers who complained about their Payment Protection Insurance (PPI). Originally, the fine was set at £6,164,327, but LBG received a 30% reduction for agreeing to settle early in the FSA’s investigation.
The fine was imposed due to LBG’s inadequacies in handling PPI redress payments from May 2011 to March 2012. During this period, despite agreeing to pay redress to 582,206 complainants, LBG failed to make these payments within the agreed 28 days in 140,209 cases (24% of the total). Delays were substantial, with significant numbers of customers waiting more than 45 days, and in some cases, over six months.
Key failings included:
- Inadequate systems and controls for managing the redress process, which relied heavily on manual operations and lacked sufficient checks and oversight.
- Poor data governance and tracking, leading to cases where payments were either delayed significantly or omitted until customers followed up.
- A lack of coordination and communication between different payment processing sites, which exacerbated the delays and inefficiencies.
As part of the remedial actions, LBG implemented improved processes including a PPI payment validation tool to prevent future delays and ensure compliance. It also completed a comprehensive reconciliation to confirm all due redress was paid, including compensating for delays.
The key takeaways for other firms to avoid similar sanctions include:
- Ensuring robust, automated systems and processes for managing large volumes of payments, reducing reliance on manual processes.
- Implementing effective tracking and data governance systems to monitor and ensure timely processing of all payments.
- Maintaining strong oversight and coordination across different processing units to ensure consistency and compliance with regulatory requirements.
- Regularly reviewing and testing redress processes to identify and rectify potential issues before they affect customers.
This case underscores the importance of organisational efficiency and strict adherence to regulatory standards in handling customer redress, especially in high-volume and complex cases like PPI.
