The FCA has fined Lloyds Bank, Bank of Scotland and Black Horse (together Lloyds) for failing to treat customers fairly when handling payment protection insurance (PPI) complaints.
Between March 2012 and May 2013, Lloyds assessed more than 2.3 million PPI complaints, rejecting 37 per cent of those complaints, the FCA said.
The regulator noted that UK 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)," the FCA said.
"In addition, Lloyds did not notify complaint handlers of known failings identified in its PPI sales processes during the relevant period."
Some complaints handlers relied on the overriding principle to dismiss customers' personal accounts of what had happened during the PPI sales process, the FCA said.
"As a result of Lloyds’ misconduct, a significant number of customer complaints were unfairly rejected," the regulator said.
Lloyds has set aside a total of £710 million to cover any redress due to affected customers, who number approximately 1.2 million, the FCA said.
"Lloyds announced in February 2015 that it had decided to freeze the release of shares in respect of deferred bonus awards from 2012 and 2013 for all members of the Group Executive Committee and for some other senior executives as a result of the FCA’s enforcement investigation," the regulator said.
"Lloyds agreed to settle at an early stage of the investigation and therefore qualified for a 30 per cent discount. Were it not for this discount the FCA would have imposed a fine of £167,758,035," it said.
