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06

Lloyds fined £117m for not handling PPI complaints fairly

Open-access content Friday 5th June 2015 — updated 5.13pm, Wednesday 29th April 2020

The Financial Conduct Authority (FCA) has issued the “largest ever retail fine” to Lloyds Banking Group for not treating customers fairly when handling payment protection insurance (PPI) complaints.

The Financial Conduct Authority (FCA) has issued the "largest ever retail fine" to Lloyds Banking Group for not treating customers fairly when handling payment protection insurance (PPI) complaints. 

The £117m fine was based on more than 2.3 million complaints, of which 37% were rejected between March 2012 and May 2013. 

The regulator said Lloyds told complaint handlers the bank's PPI sales processes were "compliant and robust unless otherwise stated" - a process called the "overriding principle". 

According to the FCA, some complaint handlers used the overriding principle to assess complaints, which was "unfair". In addition, Lloyds did not notify complaint handlers of known failings in its PPI sales process. 

The regulator also revealed some handlers did not fully investigate customers' complaints and in some cases, Lloyds did not contact customers to let them give their account of the sale. 

Georgina Philippou, acting director of enforcement and market oversight at the FCA, said Lloyd's conduct was "unacceptable".

"If trust in financial services is going to be restored following the widespread mis-selling of PPI, then customers need to be confident that their complaints will be treated fairly," she said.

"The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds. Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed."

The FCA said following the investigation Lloyds removed its overriding principle as part of its complaint assessment process and provided information on all sales process failings to complaint handlers.

In addition, Lloyds established a remediation programme to re-review or automatically uphold around 1.2 million of PPI complaints. The bank set aside £710m to cover any redress due to affected customers. Customers do not need to take action. 

In a statement Lloyds said more than 90% of customers had received payment and the remainder of the payments would be complete by the end of June. 

The bank said it would cut bonuses to executives by £2.65m and reduce the group's bonus pool by £30m. 

António Horta-Osório, group chief executive of Lloyds Banking Group, said: "While our intentions were right, we made mistakes in our handling of some PPI complaints. I am very sorry for this. We have been working hard with the FCA to ensure all customers receive appropriate redress. That process is now substantially complete." 

This article appeared in our June 2015 issue of The Actuary.
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