The UK banking regulator has fined Lloyds Banking Group a record £117 million for its failings and 'unacceptable' conduct in handling claims over payment protection insurance (PPI).

The Financial Conduct Authority (FCA) says that between March 2012 and May 2013, Lloyds Bank, Bank of Scotland and Black Horse assessed more than 2.3 million PPI complaints and rejected 37% of those – many of them wrongly.

The key to complaints being unfairly rejected was guidance issued by the banking group in March 2012, instructing complaint handlers that Lloyds' PPI sales processes were compliant and robust unless told otherwise by the bank.

Lloyds also failed to tell complaint handlers of known failings in its PPI sales processes. This meant that some complaint handlers dismissed customers' personal accounts of what had happened during the PPI sale or did not fully investigate customers' complaints.

In some instances, Lloyds didn't even contact customers to enable them to give their account of the sale. See's Reclaim PPI for Free guide for help getting your money back.

What does this mean for affected customers?

Lloyds launched a programme to re-review or automatically uphold around 1.2 million PPI complaints in 2013, which has now concluded. These complaints include all those rejected between March 2012 and May 2013 using Lloyds' incorrect complaints handling process, as well as extra claims dating back to 2011.

The banking group set aside a total of £710 million to cover any redress due to affected customers, and the group says that following its review, 90% of customers received payment and the remainder will get theirs by the end of June.

You won't have been told your complaint had been reviewed unless there was a change in the decision, in which case you'll have been written to by Lloyds.

The bank adds that where customers have changed address, name or bank account since making the claim, it will have contacted them using phone numbers it has on record, and if that didn't work, by using an external agency to trace them.

It changed its offending PPI complaints handling process after May 2013.

'Banks still aren't playing fair on PPI'

Martin Lewis, founder and editor of, says: "This record £117m on top of Clydesdale's £20m fine in April shows that banks still aren't playing fair on PPI. 

"Not long after the 2011 test case, banks improved their systems, and it looked like they were starting to take a 'let's just get this off the books and pay' attitude. But that didn't last long, and we now still see uphold rates at the Ombudsman of over 60% – in other words, over half of those rejected by the banks win if they take it further.

"Yet while £117m sounds a lot of money, it's still only a tiny fraction of the £12 billion Lloyds has put aside to pay PPI claims. More must be done to ensure the Ombudsman's decisions set a precedent for how banks deal with similar future complaints from other customers. 

"If not, we have a two-tiered structure – with justice only for those who know how to push on. That leaves many of the most vulnerable, who've already been ripped off, being the worst victims again."

Not the first time Lloyds has been in trouble over PPI

Today isn't the first time the banking group has been in trouble for PPI failings:

  • In February 2013, the FCA fined Lloyds Banking Group £4.3 million for massive delays in paying back victims of mis-selling. See the Lloyds fined £4.3 million over PPI delays MSE News story.

  • In April 2014, Lloyds Banking Group confirmed it had offered comparative redress to some customers, which means some only got partial PPI refunds because they were treated as if they'd just been sold the wrong type of PPI rather than completely mis-sold PPI. See the Reclaimed PPI? Some banks have underpaid £100s MSE News story.

  • In August 2014, it was revealed that banks and credit card providers were reopening 2.5 million old PPI complaints after unfairly rejecting or underpaying victims. At the time, Lloyds Banking Group said it was reopening around 500,000 complaints. See the Two and a half million PPI complaints to be reopened MSE News story for full details.

  • In February this year, the Financial Ombudsman Service revealed that of the major providers, Lloyds Bank wrongly turned away the most complaints during the last six month of 2014, with a huge 82% of consumers' PPI complaints and 74% of all complaints, including those about PPI, upheld by the ombudsman. See the Lloyds is worst offender for wrongly rejecting customer complaints MSE News story.
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Lloyds has been fined a record £117 million for PPI failings

'Lloyds' conduct was unacceptable'

Georgina Philippou, acting director of enforcement and market oversight at the FCA says: "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.

"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. Lloyds' conduct was unacceptable."

'We made mistakes'

Lloyds Banking Group chief executive Antonio Horta-Osorio says: "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. We remain fully committed to improving our operational procedures and ensuring we do the right thing for our customers."

Today's fine will also see the bonus pool for state-backed Lloyds, to be announced next spring, being reduced by £30 million. Its bonuses in 2014 totalled £360 million.

Only two months ago, in April, Clydesdale Bank was fined £20.6m – the previous record PPI fine – for a number of "serious" failings. See the Clydesdale Bank to review PPI claims after record £20.6m fine MSE News story.