Lloyds Banking Group fined for PPI delays

The Financial Services Authority (FSA) has fined Lloyds Banking Group (LBG) 4.3m pounds for delaying payment protection insurance (PPI) compensation to up to 140,000 customers.

The Financial Services Authority (FSA) has fined Lloyds Banking Group (LBG) 4.3m pounds for delaying payment protection insurance (PPI) compensation to up to 140,000 customers.

Firms owned by LBG - Lloyds TSB Bank, Lloyds TSB Scotland and Bank of Scotland - were penalised by the financial regulator over failings in their systems and controls.

"Between May 2011 and March 2012, LBG sent 582,206 decision letters to PPI complainants agreeing to pay redress to them," the FSA said in a statement.

"FSA rules state that redress must be paid promptly and, in line with that, LBG aimed to make payment within 28 days of these decision letters.

"However, a series of failures at LBG meant that not all customers were paid redress within that time frame."

Customers were not paid redress within 28 days of receiving a decision letter and 8,800 had to wait more than six months for their PPI redress, the FSA said.

The delays were identified as a result of customers calling to chase Lloyds for payments and media attention highlighting the issue.

"Further, when customers telephoned LBG to enquire about the non-receipt of expected PPI redress payments, deficiencies in its process meant LBG was unable to fast-track the payment to the customer, inform them when payment would be made, or explain why it had been delayed," the FSA said.

The watchdog said LBG neglected to establish an adequate process for preparing redress payments to send PPI complainants.

Lloyds was also criticised for not tracking the payments, ensuring staff had adequate knowledge of the process, and for failing to monitor payments effectively.

The group's approach to risk management when preparing redress payments to send to PPI complainants was ineffective, the FSA added.

The bank has since completed a comprehensive review of PPI redress payments. The company has paid interest at 8.0% per annum on the outstanding redress figure and has improved its processes to address the failings identified by the FSA.

"The industry let customers down badly in relation to the sale of PPI," FSA Director, Tracey McDermott, said.

"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.

"PPI is an area of continuing focus for the FSA and we continue to monitor how firms handle complaints and pay redress."

The news comes after Lloyds announced plans to slash a further 940 jobs, bringing the total of redundancies to 31,000 since its takeover of banking and insurance company HBOS in 2009. The move is part of the bank's strategy to turn business around.

RD

Recommended

How to be better at selling stocks
Investment strategy

How to be better at selling stocks

There is plenty of advice around about buying stocks, but not so much about when you should sell. John Stepek explains the two key things to know abou…
14 Jan 2022
Share tips of the week – 14 January
Share tips

Share tips of the week – 14 January

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
14 Jan 2022
Fintech: how to profit as technology transforms banking around the world
Share tips

Fintech: how to profit as technology transforms banking around the world

Financial technology – from apps to APIs to the cloud – is rapidly transforming financial services. This will spell doom for some incumbent firms, whi…
14 Jan 2022
Three solid assets to buy for a low interest-rate world
Share tips

Three solid assets to buy for a low interest-rate world

Professional investor Luke Hyde-Smith of the Waverton Real Assets Fund, highlights three alternative investments to diversify your portfolio.
14 Jan 2022

Most Popular

Five unexpected events that could shock the markets in 2022
Stockmarkets

Five unexpected events that could shock the markets in 2022

Forget Covid-19 – it’s the unexpected twists that will rattle markets in 2022, says Matthew Lynn. Here are five possibilities
31 Dec 2021
Which investment trusts performed the best in 2021?
Investment trusts

Which investment trusts performed the best in 2021?

Shivani Khandekar runs through the top ten investment trusts of 2021 – and the worst performing trusts – and looks ahead to 2022.
7 Jan 2022
Interest rates might rise faster than expected – what does that mean for your money?
Global Economy

Interest rates might rise faster than expected – what does that mean for your money?

The idea that the US Federal Reserve could raise interest rates much earlier than anticipated has upset the markets. John Stepek explains why, and wha…
6 Jan 2022