The Financial Conduct Authority (FCA) fined Lloyds Bank Plc, Bank of Scotland Plc and Black Horse Ltd (together Lloyds) $180 million for failing to treat their customers fairly when handling Payment Protection Insurance (PPI) complaints between March 2012 and May 2013.

Lloyds assessed customer complaints relating to more than 2.3 million PPI policies and rejected 37 percent 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 (the Overriding Principle).

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 the 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.

“PPI complaint handling is a high priority issue for the FCA,” said Georgina Philippou, FCA’s enforcement director. “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.”

“The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds.  Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds’ conduct was unacceptable.”

The FCA alleged that complaint handlers justified the decision to reject customers’ complaints on the basis that the sales process used by Lloyds was robust, when Lloyds knew there were significant sales process failures and mis-selling.

Some customers whose complaints were rejected were told that their complaint had been ‘fully investigated’ with ‘appropriate weight and balanced consideration [given] to all available evidence’, when this was not the case.

When assessing a customer complaint, the customer’s account of what had actually happened at the time of the sale was not always considered in a balanced way.

Due to poor customer contact processes, some customers may not have had an opportunity to provide further evidence needed for complaint handlers to reach a fair outcome for their complaint.

As a result of a substantial decline in the proportion of complaints upheld between March 2012 and October 2012, the FCA’s predecessor, the Financial Services Authority (FSA), began investigating the way Lloyds was handling PPI complaints. Following the FSA’s intervention Lloyds removed the Overriding Principle from its PPI complaint assessment process and provided information on all sales process failings to complaint handlers.