The FCA has handed a £64m fine to Lloyds, Bank of Scotland, and The Mortgage Business for activities carried out between April 2011 and December 2015.
The regulator says that the banks committed multiple failures in their relation to handling mortgage customers in payment difficulties or arrears.
FCA executive director of enforcement and market oversight Mark Steward explains that between the above details, “the banks’ systems and procedures for gathering information from mortgage customers in payment difficulties or arrears resulted in the banks’ call handlers not consistently obtaining adequate information to assess customers’ circumstances and affordability, creating a risk that customers were treated unfairly.
“The banks also employed a system that set a minimum percentage of a customer’s contractual monthly payment which a call handler was authorised to accept as a payment arrangement without obtaining further authority from a more senior colleague.
“However, in practice, the system created a risk of inflexibility in approach, with the result that call handlers may have failed to negotiate appropriate payment arrangements for customers.
“These risks were exacerbated when, as part of a simplification programme, the banks lost a large number of personnel with mortgage collections and recoveries expertise, after which point nearly all of their mortgage arrears call handlers were new-to-role,” he says.
The regulator reports that some of these failings were identified by the banks “as early as 2011,” but the steps taken then and later, in 2014 and 2015, weren’t sufficient to rectify the issues completely.
The banks’ action in not disputing the regulator’s findings prevented the imposition of a £91.5m financial penalty, it adds.
Further, a redress programme is nearly complete, the FCA says, with an estimated £300m being paid as a result.
In response, Lloyds Banking Group says that in July 2017 it undertook a voluntary redress programme and has since reimbursed all 526,000 customers who paid mortgage arrears related fees – plus interest where applicable – although not all of these customers were impacted.
It also says that the FCA recognises that the faults were inadvertent and not for financial gain.
A Lloyds Banking Group spokesperson says: “We have contacted all customers who were affected between 2011 and 2015 to apologise and have already reimbursed all who were charged fees at the time.
“Customers do not need to take any action. We have since taken significant steps to enhance how we support mortgage customers experiencing financial difficulty, including investing in colleague training and procedures.”
The FCA’s Steward adds: “Firms should take notice of the action we have taken today to ensure that their own treatment of customers meets our expectations.”
