The FCA has today fined Lloyds Bank plc, Bank of Scotland plc and The Mortgage Business plc £64,046,800 for breaches of Principles 3 and 6 in relation to their handling of mortgage customers in payment difficulties or arrears.
Between April 2011 and December 2015 the banks’ systems and procedures for gathering information from mortgagors in payment difficulties or arrears resulted in call handlers not consistently obtaining adequate information to assess affordability.
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. The FCA considered this an inflexible approach.
Some of the failings were identified by the banks as early as 2011 and again identified as part of a thematic review conducted by the FCA in 2013. A further review by the FCA in July 2015 found that the banks had failed to make sufficient progress in addressing the problems and the banks were required to undertake a Skilled Person’s review.
The banks did not dispute the FCA’s findings and exercised their right, under the FCA’s partly contested case process, to ask the FCA’s Regulatory Decisions Committee to assess the appropriate level of sanction. The banks’ agreement to accept the FCA’s findings meant they qualified for a 30% discount. Otherwise, the FCA would have imposed a financial penalty of over £91m.
In July 2017, the banks implemented a group-wide customer redress scheme which included refunding all broken payment arrangement fees, arrears management fees and interest accrued on the fees and the refund of litigation fees if applied unfairly or, in some circumstances, automatically. The banks have estimated that approximately 526,000 customers will have received redress payments totalling £300 million.
This summary has been adapted from the full version on the FCA website.