The Guardian reports that Lloyds Banking Group has been fined £4.3 million for failing to pay compensation payments to up to 140,000 customers who were mis-sold payment protection insurance.
This fine comes after the scandal which came to the surface last year regarding the mis-selling of payment protection insurance (“PPI”) for mortgages and loans. British banks have reportedly set aside a total of £12 billion to compensate these customers, with Lloyds setting aside the largest amount – £5.3 billion. However, compensation payments to the aggrieved customers was supposed to be made within 28 days of the bank determining whether they were entitled to be paid compensation. This did not happen – approximately 87,000 customers were not compensated within 45 days and a further 8,800 waited over six months to receive compensation. A number of these customers subsequently complained to the Financial Services Authority and an investigation was started into the matter.
When the FSA started their investigations they discovered that a significant number – as above – had their payments delayed. However, a significant number of claims (up to 25,000) for the mis-sold PPI also fell out of the compensation system altogether, with Lloyds unable to provide a reason as to why they had done so. It was only when these customers chased their payments that it was discovered that they had fallen out of the claim system. The investigation reached the conclusion that Lloyds had failed to set up a payment redress system that met reasonable standards and the bank was fined £4.3 million by the FSA for those breaches. The bank has recently reported that it now has over 6,000 staff employed solely to deal with payment protection insurance claims.
This is not the first time that a firm has been fined for mis-selling payment protection insurance and failing to compensate customers quickly enough – the Cooperative Bank was fined £113,000 in January for not dealing in a rapid enough fashion with the complaints.
The FSA’s director of enforcement and financial crime, Tracey McDermott, stated that Lloyds’ PPI redress payment system “fell well below the standards the FSA expects”. Lloyds, for its part, stated that it had made “administrative errors” because of the number of customers that had been contacting it and apologies to those customers whose payments had been delayed.
The FSA released figures on Monday that stated £360 million was paid out in payment protection insurance compensation in December 2012 – a drop for the third consecutive month. This, some analysts have suggested, is because of a drop in the number of genuine claims for PPI being made. The total amount paid out by banks in the payment protection insurance scandal so far is £8.4 billion. The figures are expected to fall over the coming months and the number of genuine claims continues to decrease.