Lloyds Banking Group (LLOY.L) has been fined £64m ($81m) for “unfair” treatment of hundreds of thousands of mortgage customers who ran into financial difficulty.
The Financial Conduct Authority (FCA) handed down the fine on Thursday. The sizeable levy relates to historic failings in the way Lloyds treated some customers who fell behind on mortgage payments between 2011 and 2015.
The FCA said banks failed to take into account customers’ personal circumstances, adopting an “inflexible” approach to monthly repayments that led to some customers being put on repayment plans they couldn’t afford.
“Banks are required to treat customers fairly, even when those customers are in financial difficulties or are having trouble meeting their obligations,” Mark Steward, executive director of enforcement and market oversight at the FCA said in a statement.
“By not sufficiently understanding their customers’ circumstances the banks risked treating unfairly more than a quarter of a million customers in mortgage arrears, over several years. In some cases, customers were treated unfairly, including vulnerable customers.
“Customers should still pay what is owed, but banks are obliged to treat their customers fairly when making new payment arrangements.”
The regulator handed down the sizeable fine to Lloyds Bank, Bank of Scotland, and The Mortgage Business, which are all part of the wider Lloyds group. The group received a 30% discount on the fine for accepting the FCA’s findings.
“Firms should take notice of the action we have taken today to ensure that their own treatment of customers meets our expectations,” Steward said.
Lloyds announced a group-wide customer redress scheme in 2017 worth £300m — 526,000 customers who paid mortgage arrears fees are covered by the scheme.
A spokesperson for the Lloyds Group said: “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.”