Co-op penalised by City regulator over ‘serious’ PPI claim failings

The Co-op Bank has built a reputation as an 'ethical' bank and 'regretted'  the unnecessary delays. Picture: Toby Williams
The Co-op Bank has built a reputation as an 'ethical' bank and 'regretted' the unnecessary delays. Picture: Toby Williams
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THE CITY watchdog has fined Co-operative Bank £113,300 for “serious failings” in the way it handled claims for compensation relating to mis-sold payment protection insurance (PPI).

The penalty is believed to be the first levied on the bank by the Financial Services Authority (FSA) and follows a review into the way it dealt with more than 1,600 PPI complaints during a judicial review into the process.

Between 21 January and 9 May 2011, the Co-op “unfairly” put a significant proportion of the claims on hold, the FSA said, having incorrectly decided that it could not deal with them before the conclusion of an unsuccessful High Court challenge by the British Bankers’ Association (BBA).

The FSA had sent a letter to the industry in January 2011, warning firms that they risked enforcement action if they failed to treat complaints fairly. The letter said many claims should continue as normal during the legal proceedings.

Tracey McDermott, the regulator’s director of enforcement and financial crime, said: “While nobody suffered any financial loss, Co-op’s actions meant that a significant number of people had the resolution of their valid complaints delayed for no good reason.

“We will continue to take action where we find PPI customers have not been treated fairly.”

The Co-op, which last year agreed the £750 million acquisition of 632 branches from Lloyds, has enjoyed a reputation as an “ethical” bank and recently said it had seen a strong rise in customers switching to it following scandals such as Libor manipulation and money laundering.

The bank admitted that it had not lived up to its reputation for “doing the right thing” by customers, but said it was confident there would be no repeat of the delays.

A spokeswoman said: “The Co-operative Bank recognises that, during the relevant period, it put some complaints on hold which were capable of being progressed without waiting for the judicial review to be concluded.

“Our strong reputation within the banking sector has been built upon doing the right thing by our customers but in this instance our procedures have fallen short of the high standards rightly expected of us.”

She said that, while no customers suffered any extra financial loss, the bank accepted there was an “unnecessary delay” for some customers.

The FSA said the bank had qualified for a 30 per cent discount to the fine because it had agreed to settle at an early stage in the investigation.

Without the discount, the penalty would have been £161,910.

The Co-op has set aside £130m to deal with PPI compensation claims, and analysts have predicted that the total bill across the industry could eventually top £15 billion.