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The Actuary The magazine of the Institute & Faculty of Actuaries
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FSA fines BoS £3.5m in wake of risk-profiling errors

Bank of Scotland has landed a £3.5 million fine from the Financial Services Authority (FSA) for wrongly rejecting a significant number of complaints over retail investment products, with a significant number of these coming from customers with a lack of prior investment knowledge.

A total of 2,592 complaints between 30 July 2007 and 31 October 2009 were received by Bank of Scotland regarding its sales of the Collective Investment Plan, Personal Investment Plan, Guaranteed Growth Bond, ISA Investor and Guaranteed Investment Plan. Of these complaints, up to 45% ought to have been upheld according to an internal review.

The FSA identified that the bank’s risk-profiling tool, which measured customers’ attitude to investment, contributed to the slow identification of the root causes of complaints being handled.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said the fine reflected a serious failure to treat vulnerable customers fairly. "The firm’s failure to ensure it had a robust complaint handling process in place led to a significant number of complaints being rejected when they should have been upheld," she said.

"Had Bank of Scotland undertaken effective root cause analysis of the complaints it received and had adequate processes in place to feedback lessons learned from past complaints, it could have acted sooner to improve its processes."

To date, Bank of Scotland has paid £2.4 million in compensation to customers whose complaint was upheld following its own internal review. It is expected that further compensation of around £15 million will be paid to customers once the further reviews have been completed.