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."