The watchdog has imposed a fine on entities of the Lloyds Banking Group for the way that PPI miselling complaints were handled.

The UK financial regulator has imposed its largest-ever retail fine on entities of the Lloyds Banking Group for not treating customers fairly when handling payment protection insurance complaints.

Lloyds Bank, Bank of Scotland and Black Horse were fined £117 million ($179.4 million) by the Financial Conduct Authority. The period concerning PPI complaints was from March 2012 to May 2013, the FCA said in a statement.

A number of banks have been fined for mis-selling of PPI policies in recent years and have had to set aside billions of pounds to deal with compensating clients – these costs came at a time when banks were already being squeezed by tighter capital rules in the wake of the 2008 financial crisis.  

The FCA’s statement on the matter said that in the March 2012 – May 2013 period, Lloyds assessed customer complaints relating to more than 2.3 million PPI policies and rejected 37 per cent of those complaints. Firms are required to assess complaints impartially and can reject unfounded claims.

In March 2012, Lloyds issued guidance instructing complaint handlers that the overriding principle when assessing complaints was that Lloyds’ PPI sales processes were compliant and robust unless told otherwise. In addition, Lloyds did not notify complaint handlers of known failings identified in its PPI sales processes during the relevant period.

Some complaint handlers relied on this overriding principle to dismiss customers’ personal accounts of what had happened during the PPI sale or to not fully investigate customers’ complaints. In some instances, Lloyds did not contact customers to enable them to give their account of the sale.

As a result of Lloyds’ misconduct, a significant number of customer complaints were unfairly rejected, 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,” Georgina Philippou, acting director of enforcement and market oversight at the FCA, said.

The FCA said Lloyds has made “significant progress towards the fairer treatment of customers” in its general complaint handling operation and has established an extensive remediation programme to re-review or automatically uphold approximately 1.2 million PPI complaints, including those within the relevant period.

The banking group has set aside a total of £710 million to cover any redress due to affected customers. Customers do not need to take any action. Those affected and due redress are being contacted directly. The FCA has appointed an independent skilled person to oversee the remediation process, the regulator said.

Lloyds agreed to settle at an early stage of the investigation and therefore qualified for a 30 per cent discount.