Fine for Lloyds Banking Group Over Delayed PPI payments
As talks are underway to set a deadline for PPI claims amidst the rising costs to banks of compensation payments, it has emerged that there have been delays in compensating PPI claimants.The Financial Services Authority (FSA) launched an investigation into three Lloyds Banking Group (LBG) firms- Lloyds TSB Bank, Lloyds TSB Scotland and Bank of Scotland- and subsequently fined LBG £4,315,000.
The investigation found that between May 2011 and March 2012, LBG had sent letters agreeing to pay compensation to 582,206 PPI claimants. FSA rules state that compensation must be paid “promptly”, with LBG aiming to pay compensation within 28 days.
The figures released show a different story. Up to 140,209 claimants were paid after 28 days (nearly a quarter). Nearly 87,000 took over 45 days, and 56,000 over 60 days. An additional 29,000 took over 90 days, and 8,800 took over six months. 24,589 payments dropped out of the system; LBG subsequently took action to make the payments after customer calls and media attention.
The FSA investigation found serious deficiencies at LBG concerning payments. There was “[no] adequate process” for processing and sending payments, and a lack of detailed and specific employee knowledge and experience in handling PPI payments. A lack of accountability and good management practices in this area was also found. The report also found that there was insufficient planning from the beginning for the sheer volume of PPI claims that they had to process at all stages- indeed, the whole banking industry underestimated the amount of potential PPI complaints. As a result, LBG’s systems were unable to process repaying such a high volume of claimants within the imposed timeframe.
LBG has been cooperative with the FSA throughout this investigation; by agreeing to settle early on, LBG was given a 30% discount on the imposed fine. Subsequently, LBG has reviewed its PPI repayments processes, and implemented changes, in addition to pushing through outstanding payments. Compensation and interest has also been paid to outstanding PPI repayments.
In a statement, the FSA’s Tracey McDermott said that “LBG’s PPI [re]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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