FCA set to fine Lloyds record £100m over PPI

Lloyds Banking Group is to be hit with a record fine of more than £100m for mishandling complaints over payment protection insurance in one of the costliest mis-selling scandals in UK retail banking.

The Financial Conduct Authority is expected to fine the state-backed lender with its largest penalty over PPI mis-selling on Friday, according to people familiar with the situation.

The size of the fine being handed out to Lloyds reflects the fact that the bank has many more customers than other lenders who bought the insurance product, which was meant to keep up repayments on loans should they fall sick or lose their job, according to a person close to the matter.

The fine underscores PPI as one of the most expensive scandals in recent British banking history, with a total £24bn set aside to date by lenders to cover compensation.

It comes only weeks after the watchdog fined Clydesdale Bank with a then record £21m for PPI failings that included staff falsifying information on its policies.

Lloyds, the largest mortgage lender in the country, has been the worst hit by PPI compensation costs. The state-backed lender has earmarked £12bn for compensation, of which about £10bn has been paid out.

The FCA’s predecessor, the Financial Services Authority, fined Lloyds £4.3m in February 2013 for failings that delayed customers getting redress for PPI.

The bank said this year that it was freezing deferred bonuses from 2012-2013 for management who were on the group executive committee during that period, until the conclusion of the FCA’s enforcement investigation into PPI complaint handling.

The bank stated at the time that it is “working with the regulator to resolve these issues and we continue to ensure our customers’ complaints are addressed efficiently and fairly.

PPI costs could rise as regulator considers fresh clampdown

May 27: Banks could be hit with higher costs for mis-selling payment protection insurance as the financial watchdog examines new rules to protect consumers following a landmark court case. 

Continue reading

“The board believes this is a responsible, precautionary and prudent approach, as it wants to retain flexibility to consider the release of shares under these deferred bonus awards at the conclusion of the investigation,” it added.

Redress costs have been worse than expected across the banking industry, rising to £424.5m in January this year — the highest level for 14 months. After a slight dip in February, monthly PPI payouts crept back up in March to £399m.

The watchdog announced at the start of the year that it could impose a time limit for PPI mis-selling complaints, which would help draw a line under the scandal for lenders.

However the FCA said last week that it was considering whether “additional rules” and guidance were required to deal with complaints from customers who were mis-sold PPI, in a move that could hit banks with higher costs.

Lloyds and the FCA declined to comment.