Lloyds: where toxic bonus targets made staff mis-sell to themselves

Regulator levies record £28m fine for scheme that encouraged aggressive sales

The banking industry's reputation suffered another blow yesterday as City watchdogs fined Lloyds Banking Group a record £28m for operating a toxic culture that led one desperate salesman to mis-sell policies to himself, his wife and a colleague to avoid automatic demotion.

His fear was motivated by the fact that his salary would fall from £34,000 to £26,000 if he were demoted by one tier from his post as a middle-ranking adviser – a 23 per cent pay cut. He sold life assurance, critical illness and expenses on death cover to himself and his wife even though they couldn't afford the premiums. He also sold a critical illness policy to a colleague, which was subsequently cancelled.

The sales were pushed through in the final week of one of the bank's quarters. Demotion for staff who missed targets was automatic across the three banks during the period regulators investigated from the start of 2010 until the end of March 2012.

Sales staff were also encouraged to win regular "champagne" bonuses paid every quarter to top performers.

The Financial Conduct Authority found that neither Halifax, Lloyds TSB or Bank of Scotland – all owned by Lloyds Banking Group – kept an eye out for bad sales at the end of a quarter.

Watchdogs described the risks to consumers of being pushed to buy inappropriate insurance products or investments as "acute". It also said the banks "tolerated" poor sales practices and was sharply critical of the fact that even salesmen who were found to have badly advised consumers could still be paid juicy bonuses.

Shockingly, 229 Lloyds TSB advisers got a bonus when all of their sales were classified as "advice fails" in one month. This happened on more than one occasion to 30 of them.

The three Lloyds-owned banks only monitored a tiny proportion of the sales made to check that they were compliant and the pay policies were imposed despite repeated warnings from regulators to steer clear of pay policies that encouraged bad behaviour. Over the period under investigation the banks sold £2.25bn of investment products and took in £118m in protection insurance premiums. As a group, Lloyds was ramping up the pressure as it had told the City it wanted to double customer numbers.

The FSA lambasted a "collective failing of senior management" in its final decision notice.

The bank could consider clawing back bonuses as a result, although yesterday it would only say that "the Remuneration Committee will re-consider deferred awards if appropriate to do so before being released".

Tracy McDermott, the FCA's director of enforcement, said: "Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first – but firms will never be able to do this if they incentivise their staff to do the opposite.

In a statement Lloyds said it accepted the findingsand added: "The Group launched its new strategy in 2011 to fully refocus the business on its customers."

PROMOTED VIDEO
News
Teeth should be brushed twice a day to prevent tooth decay
education
News
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
news
Sport
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
News
Those who were encouraged to walk in a happy manner remembered less negative words
science
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
News
Renee Zellweger as Bridget Jones
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London