Lloyds hit with record £117m fine for PPI mis-selling
Lloyds Bank has been hit with a record £117 million fine by the Financial Conduct Authority for failings in its handling of payment protection insurance (PPI) complaints.
The penalty adds to the £25 billion in fines that banks operating in Britain have already paid out to customers who were mis-sold the product.
In April 2015, Clydesdale Bank was fined more than £20 million by the FCA for "serious failings" in the way it handled complaints about PPI – then the largest ever fine handed out by the regulator for PPI failings.
But the new fine will eclipse that, and reflects Lloyds' position as one of the biggest sellers of PPI products. The bank has already set aside some £12 billion to pay fines and compensation related to PPI.
The FCA said the fine relates to the bank's handling of 2.3 million PPI complaints between March 2012 and May 2013, when it rejected 37% of complaints. The bank told its complaint handlers that the overriding principle when assessing complaints should be that Lloyds’ PPI sales processes were "compliant and robust unless told otherwise".
As a result, many complaints were rejected by complaints handlers, even though they were perfectly valid.
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.
PPI was sold to borrowers alongside credit products, with the aim of repaying some or all of the debt should they be unable to work for a period. However, in many cases the products were worthless. For example, many self-employed people were sold the products, even though they were ineligible to claim on them.
In January, the FCA said that in the last four years banks had handled over 14m PPI complaints and had upheld over 70%, resulting in total paid claims of £17.3 billion.
Meanwhile, HSBC has been fined £27.5 million by the Swiss authorities for allowing money laundering to take place in its Swiss arm. The 40 million franc fine is the biggest ever imposed by the authorities in Geneva.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.