The UK Financial Conduct Authority (FCA) recently reminded lenders of their responsibilities as it handed Lloyds Banking Group (LLOY.L) a record penalty for mortgage customer failings. Lloyds was fined by the City regulator over its mistreatment of more than half a million mortgage customers suffering payment difficulties during the outbreak.
In total, Lloyds was fined £64m ($81m), which included a 30 percent discount for agreeing to the charges early on, for its “unfair” treatment of hundreds of thousands of mortgage customers. The FCA found that Lloyds, along with its Bank of Scotland and the Mortgage Business divisions, did not provide appropriate support to customers in arrears between April 2011 and December 2015. On top of the discounted penalty, the largest imposed by the UK watchdog for mortgage-related failures, Lloyds has paid £300m in redress to 526,000 customers who paid mortgage arrears fees. Lloyds said that all affected customers had personally been contacted for reimbursement.
Lloyds, like most banks, has millions of customers struggling to make ends meet amid the coronavirus pandemic, with many of them taking repayment holidays on mortgages. Investigators found that the banks failed to help people who were vulnerable through times of financial difficulties, including marital splits, the death of a spouse, loss of a job, and in one case, when a family member had gone missing. According to Mark Steward, executive director of enforcement and market oversight at the FCA, the banks adopted an “inflexible” approach that put some customers 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.”
In an official statement, the FCA warned all lenders that the hardships faced by customers during the pandemic “only heightens the importance of firms treating customers in financial difficulty fairly and appropriately.” Lloyds promised to introduce improved measures to assist clients, “We have since taken significant steps to enhance how we support mortgage customers experiencing financial difficulty, including investing in colleague training and procedures.”