Lloyds chief takes cut in bonus after record £117m fine for PPI claims

Watchdog says customers were ‘treated unfairly a second time’ and denied redress

Lloyds has cut £2.65m off senior management's bonuses (AP) (AP)

The chief executive of Lloyds Banking Group, Antonio Horta-Osorio, was forced to apologise to customers as he agreed to give up part of his multimillion-pound bonus.

The state-backed lender was hit with a record £117m fine by City regulators yesterday for mishandling thousands of complaints about payment protection insurance (PPI) between March 2012 and May 2013.

Lloyds said it had decided not to pay senior management £2.65m of bonuses covering the period because of this. Mr Horta-Osorio, who picked up £11.5m in pay last year, is set to forgo about £350,000. Yesterday’s fine will be felt widely across the group, with £30m of bonuses being cut.

The Financial Conduct Authority (FCA) said some Lloyds customers whose PPI mis-selling complaints were rejected by the bank were told their grievances had been “fully investigated” when in fact this was not the case.

“The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds,” said Georgina Philippou, the FCA’s acting director of enforcement and market oversight. “Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed.”

Lloyds was handling up to 60,000 PPI-related claims a week in 2012, with 7,000 people processing the complaints. It has since agreed to review up to 1.2 million complaints and has set aside £710m to cover potential payouts.

Mr Horta-Osorio said: “When we began the remediation programme, it was thought this would cost the entire industry around £4.5bn. To date, the industry has set aside over £26bn for PPI redress, with the consequent impact on operational complexity and the significant administrative resources required.

“While our intentions were right, we made mistakes in our handling of some PPI complaints. I am very sorry for this. We have been working hard with the FCA to ensure that all customers receive appropriate redress. That process is now substantially complete.”

Shares in Lloyds fell 0.41p to 87.09p.

In April, Clydesdale and Yorkshire banks were fined a total of £20.7m for a litany of abuses in their handling of PPI claims. Lloyds, which was the biggest seller of PPI policies, has so far set aside £12bn to cover compensation payouts.

“Today’s fine should be a red flag for any banks that are stopping people getting back money they’re rightly owed,” said Richard Lloyd, executive director of the consumer group Which?

Gillian Guy, the chief executive of Citizens Advice, said: “Lloyds and other banks caught up in the PPI saga must ensure that money is given back to customers who have been so badly let down.

“It is positive that since the mishandling Lloyds has made progress on how it deals with complaints. The bank must now make sure consumers get fair outcomes. This ruling should serve as a warning to banks that complaints must be taken seriously and dealt with promptly.”

Earlier this week, George Osborne fired the starting gun for another huge sell-off of taxpayer-owned shares in Lloyds. The Chancellor has instructed UK Financial Investments – the company set up by the Government to manage the Treasury’s bank shareholdings – to continue the drip-drip sale of taxpayer shares through broker Morgan Stanley which began last December.