Bailed-out banks face huge fines for poor customer care

Royal Bank of Scotland and Lloyds Banking Group, the two part-nationalised banks, are today revealed as being the duo facing potential fines of several million pounds for not handling customer complaints properly.

City watchdog the Financial Services Authority today said it had ordered five High Street banks to improve the way they deal with complaints. It said two of the five banks had been referred to its enforcement division which could result in their being fined or censured.

The FSA refused to name the two banks but the Evening Standard has learned their identities.
RBS and Lloyds refused to confirm or deny that they are now the subject of enforcement actions.

Peter Vicary-Smith, chief executive of consumer group Which?, said: "This is another damning indictment of the banking industry, many of whose members consistently put sales before customer service."

Shares in both banks fell 5% which means the taxpayers' 83% stake in RBS and 41% stake in Lloyds are now just about at break even level having been almost £10 billion in profit this week.

The FSA that UK banks receive a staggering four million complaints a year 70% of which are directed towards the big five. Among its main findings were:

36% of complaints were poorly handled mainly by staff in branches or call centres 18% of the complaints ended up with unfair outcomes for the customer.

Three of the five banks failed to tell customers whose complaint they had rejected that they could take their grievance to the Financial Obudsman.

Four of the five banks were too slow in handling complaints.

When compensation was offered to customers it was often not enough.

Dan Waters, the FSA's director of conduct risk, said: "It is vital that customers know that if something goes wrong, their complaint will be dealt with in a reasonable way and that they will get a fair outcome.

"While we found some good practice, there is clearly evidence of unacceptable standards of complaints handling in banks."

He said that complaints were not seen as an important enough issue among the top level of banks' executives.

RBS recently released figures showing that it received around 1600 complaints a day during the final six months of 2009.

Its recently published annual report said: "In January 2010, the FSA informed the RBS Group that it intended to commence an investigation into certain aspects of the handling of customer complaints. The Bank and its subsidiaries intend to co-operate fully with this investigation."

Lloyds said it would not discuss "conversations held with the regulator" but issued a statement: "We take all customer complaints very seriously and are committed to working with the industry and regulators to ensure that complaints are dealt with fairly, quickly and consistently."

Today's report excluded complaints about overdraft charges and payment protection insurance.