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Lloyds Banking Group (LSE:LLOY) has been ordered to pay fines in relation to the delays in the payment of the bank for the redress of the mis-sold payment protection insurance (PPI) to over 140,000 customers, who were supposed to receive the funds promptly,the FSA ruled.
In a decision dated 15 February 2013, the regulator of the UK’s financial services industry ordered three of the Lloyds’ firms, namely, Lloyds TSB Bank, Lloyds TSB Scotland, and Bank of Scotland, to pay £4.315 million for the banks’ breaching of its own commitment to release the funds within 28 days of notice and for failures in the systems and procedures in processing the said redress payments.
The amount, discounted by 30% after Lloyds agreed to settle earlier on, reflected FSA’s stand of seriously dealing with breaches in resolving the PPI redress, according to Tracey McDermott, the agency’s Director of Enforcement and Financial Crime.
“LBG’s PPI redress payment systems fell well below the standard the FSA expects,” she said.
In its decision, the FSA said “LBG failed to establish an adequate process for preparing redress payments to send to PPI complainants” with the process mishandled by staff who “did not have the collective knowledge and experience”.
Between May 2011 and March 2012, nearly 600,000 communications were sent to complainants of PPI with Lloyds promising to make payments within 28 days after these decision letters were sent. Over 140,00o customers in total were not able to receive the payments with nearly 25,000 claimants dropping out of the process.
PPI, an insurance sold to credit card and loan holders to cover repayments in case of job loss or illness, were mis-sold to millions of customers of banks and financial institutions, resulting in billion pounds of redress ordered by FSA.
About £8.4 billion had already been paid since January 2011 with the total bill rising still as banks continued to set aside funds to settle PPI claims.
In London, shares of Lloyds moved slightly, at 1.3%, to 55.33 pence, by 1315 GMT.
