STATE-BACKED Lloyds Banking Group was today fined a record £117 million by the City regulator for the way it handled complaints over the mis-selling of payment protection insurance (PPI).
Lloyds apologised to customers affected and said £2.65 million worth of bonuses was being withheld from executives as it agreed the settlement with the Financial Conduct Authority (FCA). The group bonus pool for this year will be cut by £30 million.
The fine relates to a period from March 2012 to May 2013 when the group assessed customer complaints relating to more than 2.3 million PPI policies and rejected 37 per cent of those - many of them wrongly.
“As a result of Lloyds’ misconduct, a significant number of customer complaints were unfairly rejected,” the FCA said.
The fine is the largest ever retail banking penalty imposed by the authority - other larger charges have related to trading scandals such as Libor benchmark rate-rigging and foreign exchange rate manipulation.
Georgina Philippou, acting director of enforcement and market oversight at the FCA said: “PPI complaint handling is a high priority issue for the FCA.
“If trust in financial services is going to be restored following the widespread mis-selling of PPI, then customers need to be confident that their complaints will be treated fairly.
“The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds.
“Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds’ conduct was unacceptable.”
Lloyds, which remains nearly 19 per cent owned by the taxpayer after being rescued during the financial crisis, has already set aside £12 billion to cover the cost of compensating those mis-sold PPI.
Chief executive Antonio Horta-Osorio said: “We made mistakes in our handling of some PPI complaints. I am very sorry for this. We have been working hard with the FCA to ensure all customers receive appropriate redress.
“That process is now substantially complete. We remain fully committed to improving our operational procedures and ensuring we do the right thing for our customers.”