Lloyds Banking Group has been fined £117m, the largest retail banking penalty ever imposed by the Financial Conduct Authority (FCA).
The FCA led an investigation into Lloyds’ complaint handling procedures carried out between March 2012 and May 2013. During this period, Lloyds handled over 2.3m PPI complaints, and 37% of these were dismissed, with customers wrongly told that their case had been ‘fully investigated’ when this was not the case.
Lloyds have been forced to review 1.2m historical complaints, with 863,000 taken from the period for which they received the fine. The FCA confirmed that:
“As a result of Lloyds’ misconduct, a significant number of customer complaints were unfairly rejected”
This misconduct came from Lloyds’ internal policy known as ‘Lighthouse’ or ‘overwriting principle’. The process, which began in March 2012, saw Lloyds complaint handlers instructed to assume that all PPI sales were ‘compliant and robust’ unless told otherwise, and so a fair investigation of redress was not always carried out. The following year, Lloyds were fined £4.3m by the FCA for delaying payment to those that were granted compensation.
The Chief Executive of Lloyds, Antonio Horta-Osorio, responded by saying that he was ‘very sorry’ and admitted that:
“Whilst our intentions were right, we made mistakes.”
Lloyds have now cut their yearly bonus pool by £30m, and set aside an additional £710m (including Administration costs) to cover any redress owed to the affected customers. Lloyds Banking Group currently hold the largest bill for PPI costs at £12bn, almost half of the amount set aside by the banking industry as a whole, which currently stands at around £24bn (including Administration costs).
BBC, ‘Lloyds hit by record £117m fine over PPI handling’, 05.06.15
The Guardian, ‘Record PPI fine for Lloyds knocks £350k off Horta- Osario’s bonus’, 05.06.15
The Times, ‘Lloyds fined £117m for PPI complaints mis-handling’, 05.06.15
The Telegraph, ‘Lloyds cut bonuses aftyer record fine for PPI failings’, 05.06.15
Daily Mail, ‘Lloyds hit with record £117m fine…’, 05.06.15