Lloyds Banking Group, part-owned by the UK government, has been fined a total of £4.315 million ($6.4 million) by the financial regulator for failings causing late redress payments relating to payment protection insurance.

Banks have paid out billions of pounds to compensate people mis-sold PPI in recent years. In Lloyds’ case, up to 140,000 customers due to receive compensation were paid late owing to failings in the bank’s systems and controls, according to a statement from the Financial Services Authority.

Between May 2011 and March last year, the banking group sent 582,206 decision letters to PPI complainants agreeing to pay redress to them. FSA rules state that redress must be paid promptly and, in line with that, LBG aimed to make payment within 28 days of these decision letters.  However, a series of failures at LBG meant that not all customers were paid redress within that time frame, the FSA said.

Meanwhile, in a statement, Lloyds Banking Group said: "When we took the lead in 2011 to compensate customers on PPI, we had not fully anticipated the volume of complaints to be processed at the outset and experienced some administrative errors as we scaled up our systems and processes.  We acknowledge that this led to some customers not being compensated on time and we apologise to those customers whose payments were delayed."

"It is important to note that almost all customers who were due redress during the review period have now been paid in full and, as the FSA notes, we have taken steps to ensure customers have not been financially disadvantaged,” the bank added. 

Delays

Up to 140,209 customers - nearly a quarter – received payment after 28 days. Around 87,000 customers had to wait over 45 days, 56,000 over 60 days, 29,000 over 90 days and 8,800 over 6 months, the statement said.

Of the total, 24,589 payments inadvertently dropped out of the process and LBG had to take action to ensure the payments were made.  The payments were identified as a result of customers calling to chase payment and media attention, the FSA said.

“Further, when customers telephoned LBG to enquire about the non-receipt of expected PPI redress payments, deficiencies in its process meant LBG was unable to fast-track the payment to the customer, inform them when payment would be made, or explain why it had been delayed,” the FSA said.

“The industry let customers down badly in relation to the sale of PPI. The significant volume of complaints is a product of LBG’s own failings and the least customers can now expect is that redress, when it is due, will be paid promptly,” Tracey McDermott, FSA director of enforcement and financial crime, said.

“PPI is an area of continuing focus for the FSA and we continue to monitor how firms handle complaints and pay redress,” she said.

Latest figures show that a total of £8.4 billion has been repaid by the industry since January 2011.