Lloyds Banking Group has been fined £64m over its handling of more than half a million mortgage customers suffering payment difficulties.
The Financial Conduct Authority found that the bank failed to provide appropriate support to “vulnerable” customers in arrears between 2011 and 2015, including those experiencing marital splits, the death of a spouse or loss of a job.
The penalty is the largest fine for any UK high street lender in five years and comes at a time when millions of customers are struggling financially amid the coronavirus pandemic.
– The staff didn’t obtain enough information to assess the affordability of repayment plans
– The process didn’t give call handlers flexibility to agree to appropriate payment plans due to a “Payment Authority Matrix” approach
– The staff didn’t receive refresher training on vulnerable customers
– Complaints weren’t properly acted upon
– They exacerbated the issue by combining mortgage and unsecured collections teams, resulting in a loss of expertise
– Didn’t fully rectify the issues identified
City watchdog rules bank mishandled cases of 526,000 customers who fell into difficulties
Lloyds Banking Group has been fined £64m by the City watchdog for failing to treat mortgage customers fairly after they fell into financial difficulty.
The fine is linked to Lloyds’ mishandling between 2011 and 2015 of more than 526,000 mortgage customers, who have since been reimbursed a total of £300m. The Financial Conduct Authority said that while the bank identified the problem as early as 2011, it “failed to fully rectify the issues”.
The problem started with how the bank gathered information about mortgage customers who had fallen behind or were finding it difficult to make payments. It meant call handlers did not have adequate information to assess customers’ circumstances.
Call handlers were also able to approve certain payment arrangements which did not have to be signed off by more senior colleagues. It led to a less flexible system in which call handlers may have failed to negotiate appropriate payment arrangements for customers.
The FCA said the issues worsened when Lloyds combined its mortgage handling and unsecured lending call handler teams as part of a simplification programme that followed its merger with HBOS during the financial crisis. A number of sites that had specialised in mortgages arrears were closed and operations moved to sites where most call handlers were new to the role.
The FCA said other banks should take notice of the fine and ensure their own customers were also being treated fairly.
Mark Steward, the FCA’s executive director of enforcement and market oversight, said: “Banks are required to treat customers fairly, even when those customers are in financial difficulties or are having trouble meeting their obligations.
“By not sufficiently understanding their customers’ circumstances the banks risked treating unfairly more than a quarter of a million customers in mortgage arrears.”
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