Three firms held up payouts, says regulator

Money cash fire hand

The FSA has fined three Lloyds Banking Group firms a total of £4.31m for delaying 140,000 payouts for mis-sold payment protection insurance (PPI).

The firms, Lloyds TSB Bank, Lloyds TSB Scotland and Bank of Scotland, caused payment delays through failings in their systems and controls, according to the regulator.

The Lloyds Banking Group companies agreed to settle with the FSA at an early stage of the investigation and therefore got a 30% discount. Without the discount LBG would have been fined £6.16m.

Between May 2011 and March 2012, the three Lloyds divisions sent 582,206 decision letters to PPI complainants agreeing to pay redress.  FSA rules state that redress must be paid promptly, so the Lloyds arms aimed to pay within 28 days of sending the letters, but failed for around a quarter of the customers.

Up to 140,209 customers got payment after 28 days.  Around 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. 

During its investigation the FSA found that the three firms:

  • Failed to establish an adequate way to prepare PPI payouts, and that their systems could not process the huge volumes of complaints quickly enough 
  • Had staff that did not have the ability to manage the PPI payouts properly
  • Did not track PPI redress payments well
  • Did not monitor how quickly the payments were made.

Lloyds Banking Group has since reviewed its PPI payout procedure to make sure all claimants got the right amount and were compensated for any delay in getting their cash.

FSA director of enforcement and financial crime Tracey McDermott said: “The industry let customers down badly in relation to the sale of PPI. The significant volume of complaints is a product of LBG’s own failings and the least customers can now expect is that redress, when it is due, will be paid promptly.

“In short, LBG’s 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.

“PPI is an area of continuing focus for the FSA and we continue to monitor how firms handle complaints and pay redress.”

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