FCA has fined Lloyds Bank, Bank of Scotland and the Mortgage Business £64,046,800 for failures in relation to handling of mortgage customers in payment difficulties or arrears between April 2011 and December 2015. The fine was reduced by 30% as the banks agreed FCA’s findings.
The banks’ systems and procedures for gathering information from customers in difficulties meant that, over this extended period, call handlers did not consistently get adequate information to enable an assessment of customers’ circumstances and affordability. This led to a risk that customers were treated unfairly.
Also, the call handlers were authorised to accept a minimum percentage of a customer’s monthly payment as a payment arrangement without the need for any further authorisation. This led to a risk of inflexibility with the call handlers risking failure to negotiation appropriate payment arrangements, and the banks’ monitoring practices failed to identify that the lack of appropriate information could result in unfair treatment.
Both these risks were exacerbated by an internal simplification programme within the banks resulting in a new set of mortgage arrears call handlers who were new to the role.
FCA decided the banks had breached Principles 3 and 6. An attempt to rectify issues in 2011 had not fully done so, and led to FCA noting failings during a thematic review in 2013. Again, the steps to remedy them did not make sufficient progress, and FCA required a skilled persons review in 2015, which found 38 or 100 files reviewed had evidence of unfair treatment of customers.
The banks put in place a scheme to refund all broken payment arrangement fees, arrears management fees and interest accrued on them and the refund of litigation fees if applied unfairly or automatically. The banks have contacted all affected customers and, by November 2019, had paid nearly £260m of the estimated total redress due of £300m. Over 500,000 customers were affected. FCA noted that the breaches were unintentional and that the banks had put in place significant measures to ensure appropriate redress would be made.
FCA noted the importance of firms investing in their collections and recovery staff to ensure they can properly monitor customer outcomes and take appropriate action where needed. It further noted the heightened importance of treating customers in financial difficulty fairly and appropriately during Covid-19.