LONDON – Mortgage lender Lloyds Banking Group has agreed to pay out £238 million in compensation to customers who experienced unfair late payment fees and unsustainable repayment plans.
Following discussions with the Financial Conduct Authority, Lloyds said it agreed to set up a redress scheme for mortgage customers who racked up fees after falling behind on repayments.
The bank admitted it had not always ensured customers were given affordable and realistic payments plans.
The bank predicts the repayments will affect around 590,000 customers, and cost about £283 million.
“Ensuring fair treatment of customers, especially those in financial difficulties or who are vulnerable, is a key priority for the FCA. We continue to engage with Lloyds as it works to improve the way it treats customers in arrears,” said Jonathan Davidson, executive director of supervision retail and authorisations at the FCA.
The repayments will apply to customers who incurred fees between January 2009 and January 2016 and will include any interest that was incurred, as well as an additional 8% in interest for customers who were deprived of funds.
The bank says it will compensate customers for “distress and inconvenience,” and losses that customers may have experienced as a result of not being able to keep up with unfair repayment plans. Refunds will also cover any unfair costs customers incurred by entering the bank’s litigation process during this period.
Lloyds’ total misconduct charges, which include complaints relating to payment protection insurance (PPI), now total roughly £1.6 billion. Despite this, the bank has reported a rise in pre-tax profits for the first half of 2017.
The lender is asking customers to consider whether they are eligible for repayments, although customers do not need to take any action until they are contacted by the bank.