Lloyds fined record £117m for “unfairly rejecting” PPI complaints

The FCA slapped the still partly state-owned lender with a £117 million penalty after finding that many customer complaints relating to more than 2.3 million PPI policies had been “unfairly rejected” between March 2012 and May 2013.

The FCA found that in March 2012, Lloyds issued guidance instructing complaint handlers that the overriding principle when assessing complaints was that Lloyds’ PPI sales processes were compliant and robust unless told otherwise, leading to a 37 percent of those complaints being dismissed.

Firms are required to assess complaints impartially and can reject unfounded claims.

The regulator also found that Lloyds did not notify complaint handlers of known failings identified in its PPI sales processes during the same period.

Some complaint handlers relied on the ‘Overriding Principle’ to dismiss customers’ personal accounts of what had happened during the PPI sale or to not fully investigate customers’ complaints. In some instances, Lloyds did not contact customers to enable them to give their account of the sale.

Georgina Philippou, acting director of enforcement and market oversight at the FCA said: “PPI complaint handling is a high priority issue for the FCA. 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.”

The FCA said Lloyds has made “significant progress towards the fairer treatment of customers in its general complaint handling operation and has established an extensive remediation programme to re-review or automatically uphold approximately 1.2 million PPI complaints, including those within the relevant period.”

The bank has set aside a total of £710m to cover any redress due to affected customers.

Lloyds agreed to settle at an early stage of the investigation and therefore qualified for a 30 percent discount. Were it not for this discount the FCA said it would have imposed a fine of £167,758,035.

Responding to the fine Lloyds chief executive Antonio Horta-Osorio, who is reportedly set to lose around £350,000 from his bonus over the scandal, said: “Whilst our intentions were right, 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.”