Lloyds Banking Group has been forced to repay around £10 million to up to 200,000 customers who were denied seven years of interest payments due to an administrative error, MarketWatch can reveal.
The British banking company LLOY, -1.34% LYG, -1.81% failed to advise scores of customers that it had slashed interest rates on a raft of Halifax, Bank of Scotland and Lloyds savings accounts beginning in 2012.
This caused savers to miss out on millions of pounds in interest income they could have earned had Lloyds maintained rates or had they moved funds to a different savings account.
The blunder could also cause Lloyds to breach Financial Conduct Authority rules aimed at maintaining transparent and fair banking practices in Britain.
The lender was forced to send letters to customers advising them of its error.
One letter, sent out this week and seen by MarketWatch, was titled, “We’re making a payment to you.” It read: “We didn’t send you some letters about changes to your savings account when we should have.
“If we had sent this information to you at the time, you may have chosen to put your money in a different savings account. I’m sorry this happened.”
It is understood the Financial Conduct Authority has been informed as part of standard and ongoing Lloyds engagement with the regulator.
It is a requirement that British banks adhere to a set of rules contained in the FCA handbook. Failure can result in either supervisory or enforcement action that includes sanctions and fines.
The handbook says it is required that companies “provide … a banking customer appropriate information about a retail banking service … in good time.”
It issues additional guidance that “a firm should provide notice of the expiry of the application of that rate of interest to the banking customer … within a reasonable period before that rate of interest ceases to apply.”
A spokesman for Lloyds Banking Group said: “We have identified that some of our customers have received delayed information relating to their account with us.
“We are contacting customers to apologize and make them aware of any missed information.
“We will, where appropriate, offer redress. Customers do not need to take any action as anyone affected will be contacted.”
It is understood that the issue relates to processes that are no longer in use today.
The issue comes at a sensitive time for Lloyds Chief Executive António Horta-Osório ahead of the reporting of first-quarter results next Thursday. Analysts predict flat pretax profit of £2 billion on total income of £4.55 billion, down from £4.58 billion for the same period last year.
This is the latest in a string of embarrassing breaches to have beset the bank.
Last year it put aside another £460 million in costs for payment protection insurance (PPI) for the settlement of mis-selling claims. This took the total it has earmarked for the claims, which have affected most High Street lenders, to £19.2 billion.
In 2017, the Times reported Lloyds had written to more than 7,000 customers of Lloyds and Scottish Widows, its investment arm, offering compensation to those who were mis-sold investment products as “low risk” that turned out to be too complex and performed poorly.
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