Bank of Scotland to pay £17m in compensation
Bank of Scotland customers are likely to get £17 million in compensation after the state-backed lender wrongly rejected thousands of complaints about its investment products.
The Financial Services Authority fined the bank £3.5 million and secured the huge compensation sum after an investigation found that around 45% of the complaints it had handled should have been upheld rather than rejected.
The complaints were in relation to retail investment products, including the collective investment plan, personal investment plan, guaranteed growth bond, ISA investors and guaranteed investment plan.
Tracey McDermott, the FSA's acting director of enforcement and financial crime, says:
"This fine reflects Bank of Scotland's serious failure to treat vulnerable customers fairly. The firm's failure to ensure it had a robust complaint handling process in place led to a significant number of complaints being rejected when they should have been upheld."
The Bank has agreed to review 8,614 rejected complaints relating to investment advice received between 1 February 2004 and 31 December 2009 that were not upheld or not subsequently referred to the Financial Ombudsman Service.
It has also agreed to review the sale of some investment products to 7,903 Halifax and Bank of Scotland customers between 30 July 2007 and 1 March 2010. It says these are customers that were initially assessed as having an overall cautious approach to investments. The review will verify that proper reasons for the recommendation of the products were recorded at the time of sale.
Ray Milne, risk director at Bank of Scotland, says: "We recognise that on this occasion we have fallen short of the high standards of service our customers should be able to expect of us and we apologise to them for this.
"We are committed to putting this right and have co-operated fully with the FSA to determine the proper course of action for these customers. I would like to assure customers that the issues relate to processes that are no longer used today.
"We are in the process of contacting affected customers and will pay compensation where it is due."
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.