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Lloyds Banking Group sets up redress scheme for mortgage arrears customers

Lloyds Banking Group (Lloyds) has agreed to set up a redress scheme for mortgage customers who incurred fees after they fell behind with their mortgage payments.

Following engagement with the Financial Conduct Authority (FCA), Lloyds acknowledged that when customers fell into arrears, they did not always do enough to understand customers’ circumstances to be confident that their arrears payment plans were affordable and sustainable. 

As a result, Lloyds has committed to refund all fees charged to customers for arrears management and broken payment arrangements from 1 January 2009 to January 2016.  For those mortgage customers who entered its litigation process during this period, this will include any litigation fees that were applied unfairly. 

Lloyds will also offer payments for potential distress and inconvenience, and consequential loss which customers may have experienced as a result of not being able to keep up with unsustainable repayment plans.

Lloyds estimates that approximately 590,000 customers will receive redress payments, totalling around £283 million.

Jonathan Davidson, Executive Director of Supervision- Retail and Authorisations at the FCA, said:

“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.”

The redress scheme will refund the accrued interest on all fees up to the remediation date or, where customers have already paid the fees, the date when the fees were paid. Lloyds will also pay an additional 8% interest for customers deprived of funds. 

Lloyds will write to all affected customers to explain the refund they will receive and to prompt them to make a claim for any distress and inconvenience they may have experienced. Lloyds will also advise customers to consider whether they suffered any consequential losses as a result of this issue, such as a direct debit fee charged because of a broken payment plan. Customers do not need to take any action until they are contacted by the bank.

The FCA continues to engage with Lloyds and the retail lending sector to continue to raise standards and ensure the fair treatment of customers in arrears and financial difficulties. 

Notes to editors

  1. Lloyds Banking Group suspended arrears management fees in January 2016.
  2. On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  3. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  4. Find out more information about the FCA.

 

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