Lloyds Banking Group Plc was fined 4.3 million pounds ($6.66 million) by the U.K. financial regulator for making late compensation payments to customers who were improperly sold payment-protection insurance.
Three units of the bank, which has set aside $8.2 billion for redress, failed to pay as many as 140,000 customers on time, the Financial Services Authority said in a statement today. The bank had 28 days to pay compensation under the regulator’s rules, yet about 8,800 customers had to wait more than six months after receiving notification that they’d be paid.
“The industry let customers down badly in relation to the sale of PPI,” said Tracey McDermott, the FSA’s head of enforcement. “The significant volume of complaints is a product of Lloyds’s own failings and the least customers can now expect is that redress, when it is due, will be paid promptly.”
Lloyds has set aside more than any other U.K. bank to compensate clients who were forced to buy, or didn’t know they had bought, insurance to cover their repayments on mortgages, credit cards and other loans. The bank failed to establish an adequate process to make payments and its systems couldn’t keep up with the volume, the FSA said.
Lloyds said it acknowledges the failures and apologizes to customers who weren’t paid on time.
“When we took the lead in 2011 to compensate customers on PPI, we had not fully anticipated the volume of complaints to be processed at the outset and experienced some administrative errors as we scaled up our systems and processes,” Lloyds said in an e-mailed statement.
The majority of PPI products were sold correctly and represented “good value” to customers, Lloyds’s ex-Chief Executive Officer Eric Daniels told lawmakers last week. The bank’s sales practices put it “on the side of the angels,” Daniels said in evidence to the Parliamentary Commission on Banking Standards.
Daniels had about 580,000 pounds of his 1.45 million-pound bonus for 2010 clawed back as a result of the PPI scandal, London-based Lloyds, the U.K.’s largest mortgage lender, said last year.