Lloyds Banking Group has been fined £4.3 million by the City watchdog for massive delays in paying back mis-sold payment protection insurance, after MoneySavingExpert.com first revealed the plight of victims.
- Lloyds fined £4.3 million for delayed PPI redress
- Up to 140,000 received payment late
- Bank failed to set up 'adequate' redress process
The Financial Services Authority (FSA) has punished the giant, which includes Bank of Scotland, Halifax and Lloyds TSB, for failing to provide cash for more than 140,000 victims within the agreed 28 days after a bank formally accepts a refund claim.
The watchdog says it became aware of the scandal after customers called to chase payment, and media attention. We broke the news in October 2011 (see Anger at Lloyds PPI delays.)
The delays represented a double blow to customers who the bank wrongly flogged useless PPI to in the first place. Lloyds, as a group, has set aside £5.3 billion to cover PPI mis-selling claims.
This may not be the last PPI trick
Martin Lewis, MoneySavingExpert.com creator, says: "Lloyds is rightly being given a kicking for not delivering on its promised payouts, leaving many struggling who were banking on the cash.
"Yet in truth this fine is paltry. £4.3 million is just 0.08% of its total PPI redress budget of £5.3bn, a relatively minor cost of scale and a fraction of the money it was late to pay. So it's questionable how big an impact it'll have.
"My biggest worry about Lloyds is that anecdotal feedback indicates it may be returning to a war of attrition on those trying to get mis-sold money back.
"In other words, it's rejecting claims out of hand it knows people would win at the Ombudsman. Thus it is relying on people's confusion, ignorance, or just lack of time to ensure a fair chunk of those entitled to payouts won't take up their rights, saving it millions."
Lloyds agreed to pay 582,000 customers between May 2011 and March 2012. But the FSA found roughly a quarter, 140,209, had to wait longer than 28 days for their redress.
Of that total, it adds about 87,000 customers had to wait over 45 days, 56,000 over 60 days, 29,000 over 90 days and 8,800 over 6 months.
In addition, the FSA says when customers contacted the bank, it was unable to tell customers when they would receive redress.
FSA director of enforcement and financial crime, Tracey McDermott, says: "The significant volume of complaints is a product of Lloyds's failings and the least customers can now expect is that redress, when it is due, will be paid promptly.
"In short, its PPI redress payment systems fell well below the standard the FSA expects, and the size of this fine reflects how seriously we view these breaches.
"All regulated firms must treat those who complain fairly and that includes paying redress promptly when it is due."
A Lloyds spokesman says: "When we took the lead in 2011 to compensate customers on PPI, we had not fully anticipated the volume of complaints to be processed and experienced some administrative errors as we scaled up our systems and processes. We acknowledge this led to some customers not being compensated on time and we apologise to them.
"It is important to note almost all customers who were due redress during the review period have now been paid in full and, as the FSA notes, we have taken steps to ensure customers have not been financially disadvantaged."