Lloyds Banking Group must pay a £64m fine for failing to treat over a quarter of a million mortgage customers in arrears fairly.
Lloyds Bank, the Bank of Scotland and the latter’s subsidiary The Mortgage Business all failed to take struggling customers’ financial circumstances into account when arranging repayments.
The banks’ systems and procedures meant call handlers did not always get the necessary information to accurately assess mortgage customers’ circumstances and affordability, the Financial Conduct Authority (FCA) said.
That risked customers being treated unfairly between April 2011 and December 2015, the financial watchdog said.
Additionally, Lloyds Banking Group’s system allowed call handlers to accept a minimum percentage of interest on top of customers’ monthly mortgage repayments without anybody senior signing it off. In practice, this meant the banks did not adjust this percentage to take customers’ financial circumstances into account.
This was exacerbated when Lloyds Banking Group made experienced mortgage collections and recoveries expertise staff redundant as part of a simplification programme, the FCA said.
“Banks are required to treat customers fairly, even when those customers are in financial difficulties or are having trouble meeting their obligations,” Mark Steward, FCA executive director of enforcement and market oversight, said.
“By not sufficiently understanding their customers’ circumstances the banks risked treating unfairly more than a quarter of a million customers in mortgage arrears, over several years. In some cases, customers were treated unfairly, including vulnerable customers.”
Lloyds Banking Group received a 30 per cent reduction on its fine by accepting the FCA’s findings. Otherwise it would have paid £91.54m.
The three banks began a group-wide customer redress scheme in July 2017 and estimate they have paid 526,000 customers £300m.
A Lloyds Banking Group spokesperson said:
We have contacted all customers who were affected between 2011 and 2015 to apologise and have already reimbursed all who were charged fees at the time. Customers do not need to take any action. We have since taken significant steps to enhance how we support mortgage customers experiencing financial difficulty, including investing in colleague training and procedures.