Leading U.K. bank, Lloyds Banking Group, has pledged to refund all fees they charged to customers between 2009 and 2016.
After discussions with the FCA, Lloyds agreed to refund fees they charged to customers who fell behind on their mortgage payments between 1st January 2009 and January 2016. Reportedly, Lloyds charged fees for arrears management and broken payments without checking with customers that the repayment plans were affordable, which is said to be the reason for the refunds.
In some cases, Lloyds filed a litigation with the courts and charged customers fees for that too. This probably led to many customers’ downward spiral in to more financial debt, which would no doubt have caused customers a lot of distress for people.
Compensation to be paid
The bank will be paying compensation to those who experienced distress and inconvenience on top of money lost from being unable to keep up with the reportedly “unmanageable” repayment plans. This includes interests on the fees charged and an additional 8% for customers who were deprived funds.
Lloyds has also agreed to refund unfair litigation fees for those who were reportedly “forced” into the litigation process without their knowledge.
Approximately 590,000 customers were affected by this and are set to receive their share of £283 million in compensation, which averages to around £480 per victim.
Crucial role of the FCA
Jonathan Davidson from the Financial Conduct Authority (FCA) highlighted the importance of transparency for customers:
“…ensuring fair treatment of customers, especially those in financial difficulties or who are vulnerable, is a key priority for the FCA.”
The FCA’s responsibilities are as follows:
- Protecting customers: securing protection for consumers
- Enhancing market integrity: protect the U.K. financial system
- Promoting competition: for the interests of consumers
On this occasion, Lloyd’s customers were said to have been robbed of the opportunity to figure out their financial needs, and instead were lumbered with more debt. The way Lloyds acted was reportedly in breach of provisions laid out in the FCA.
Mr Davidson suggests that the FCA will be keeping a close eye on the bank and how they handle their customers:
“…we continue to engage with Lloyds as it works to improve the way it treats customers in arrears.”
Lloyds to contact customers
Lloyds are to contact affected customers to refund fees that were charged to them. The bank will also prompt customers to make a claim for the distress and inconvenience that may have been caused as a result.
Lloyds will also reportedly advise customers to think about whether they had suffered any consequential loss as a result of the issue. This may include a direct debit fee charged because of a broken payment plan.
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