Lloyds bank fined record £28m for 'serious failings'

Lloyds staff "are not supposed to be salespeople," says FCA director Tracey McDermott

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Lloyds Banking Group has been fined £28m for "serious failings" in relation to bonus schemes for sales staff.

The Financial Conduct Authority said it was the largest fine that it or the former Financial Services Authority had imposed for retail conduct failings.

The bonus scheme pressurised staff to hit sales targets or risk being demoted and have their pay cut, the FCA said.

Lloyds Bank has accepted the regulator's findings and apologised to its customers.

"The findings do not make pleasant reading," said FCA director Tracey McDermott.


There was a grim atmosphere in some Lloyds, Halifax and Bank of Scotland branches, as staff tried to avoid being demoted and having their pay cut for failing to meet sales targets.

"I left just before I was likely to have had a breakdown," one staff member told the BBC.

Another reported that "The only thing that matters is hitting sales numbers, not the customer."

And one who lost his job said: "I can only describe my nine months in a branch as a disgrace."

Lloyds has embarked on a trawl of sales to 692,000 customers to see how many may have lost out.

About 11,000 cases are being prioritised - cases where the behaviour of advisers seemed to be most questionable.

There are suggestions that Lloyds may have set aside as much as £100m to cover compensation for failings including the ones highlighted today.

The fine could have been £35m had Lloyds not agreed to settle early, the FCA said.

Lloyds has already set aside £8bn for mis-selling loan insurance and £400m for mis-selling interest rate swaps. And in 2003 it was fined £1.9m and handed a £100m compensation bill by the Financial Services Authority for mis-selling so-called "precipice bonds".

Richard Lloyd, executive director of consumer organisation Which?, said: "This should send a clear message to the banking industry that mis-selling won't be tolerated and that customers, not sales, must come first."

He called for the FCA to deliver "a big change in banking culture across the industry".

'Champagne bonus'

"In one instance, an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted," the FCA said.

The FCA said the failings affected branches of Lloyds TSB, Bank of Scotland (BoS) and Halifax and involved the sale of individual savings accounts and income protection insurance products between 2010 and 2012.

More than one million products were sold to nearly 700,000 customers over the period.

Lloyds TSB offered some staff a "champagne bonus" of 35% of their monthly salary if they met sales targets, while Halifax and BoS offered monthly "grand in your hand" bonuses.

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Although Lloyds behaved in a way regarded by the regulator as thoroughly reprehensible... those customers generally aren't out of pocket”

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But the FCA found that more than 200 Lloyds TSB sales advisers received bonuses even though all their sales were unsuitable or potentially unsuitable.

"Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first - but firms will never be able to do this if they incentivise their staff to do the opposite," said Ms McDermott.

"Because there have been numerous warnings to the industry about the importance of managing incentives schemes, and because Lloyds TSB had been fined in 2003 for unsuitable sales of bonds, we have increased the fine by 10%," she added.

Wrongs righted

The FCA said both Lloyds and Bank of Scotland had since made "substantial changes" and that many of the wrongs were now being righted.

The firms had agreed to review sales of investment products by financial advisers and "pay redress where unsuitable sales took place", it added.

Accepting the FCA's findings, Lloyds Banking Group said in a statement: "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.

"We are determined to ensure that any customer impacts are dealt with quickly and fully."

The statement added that the bank did not expect there to be any "material financial consequences" as a result of the fine and potential compensation to customers.

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