The UK’s Financial Conduct Authority (FCA) has imposed a £28m penalty against Lloyds Banking Group over what it termed ‘serious failings’ in its sales incentives schemes.
The penalty marks the largest fine ever inflicted by the regulator against a retail bank, and was determined on the basis of practice enacted by Lloyds TSB, Bank of Scotland (BoS) and Halifax between 2010 and March 2012.
Go deeper with GlobalData
According to the regulator, the bonus schemes under fire put pressure on staff to achieve sales targets even when products sold, including stocks, share ISAs and insurance protection, were deemed inappropriate for the consumers involved.
An investigation into the bank’s conduct showed that 70% and 30% of Lloyds TSB and Halifax advisors respectively still receive a monthly bonus, despite sales found to be unsuitable by the banks themselves.
Tracey McDermott, director of enforcement and financial crime for the FCA, said that Lloyds’s failure to acknowledge repeated warnings from industry regulators had led to an increased fine, adding: "The findings do not make pleasant reading".
It was found that over 200 Lloyds TSB advisors received a bonus, despite their sales being classed as unsuitable or potentially unsuitable.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataMcDermott commented: "Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart".
"The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere," she added.
Lloyds Banking Group has since apologised for the ‘potential customer impacts’ generated by its sales policies, saying: "We are already contacting customers, and will continue to contact potentially affected customers over the coming months.
"Customers do not need to take any action at this stage to be included in the review and they will be contacted in due course."
The Group also stated it does not expect the cost of enforcement and reviews to have a material impact, adding: "The Group recognises that its oversight of these particular schemes during the period in question was inadequate and apologises to its customers for the impact that they may have had".
Related articles:
Lloyds bank PPI costs to rise by £750m
Lloyds plans to sell 21% stake in St James’s Place
Current account switching to increase Halifax customer base to 300,000 a year: Reports
