Savings scandal leaves Bank of Scotland facing £20m bill

Bank of Scotland is to pay a £3.5m fine after wrongly advising thousands of customers – many of them pensioners – to invest in risky stock market-linked savings plans and then unfairly rejecting their complaints.

The size of the fine, one of the largest penalties ever handed to a retail bank by the Financial Services Authority, reflects the failure of the bank to properly investigate the cases of customers mis-sold the products – almost half of those who then sought help from the independent Financial Ombudsman Service had the rejection of their complaints overturned.

Tracey McDermott, the FSA's acting director of enforcement and financial crime, said the regulator had also been particularly concerned about the case because so many "vulnerable" older people had been caught up in the mis-selling of the risky savings plans.

"The firm's failure to ensure it had a robust complaints handling process in place led to a significant number of complaints being rejected when they should have been upheld," she said.

"Had Bank of Scotland undertaken effective root-cause analysis of the complaints it received and had adequate processes in place to feed back lessons learned from the past complaints, it could have acted sooner."

During the 27 months to the end of October 2009, Bank of Scotland received 2,592 complaints about sales of a string of similar savings products, only to wrongly reject large numbers of them. A subsequent review of the cases by the bank revealed 45 per cent of the complaints should have been upheld.

In addition to the FSA fine, the bank has already paid compensation of £2.4m to customers caught up in the crisis, but expects to pay further redress of £15m after a review of more than 8,600 sales. The bank has promised to complete the review by the end of July and yesterday apologised for its behaviour. It has also overhauled its complaints handling process.

"We recognise that on this occasion we have fallen short of the high standards of service our customers should be able to expect of us and we apologise to them for this," said Ray Milne, the bank's risk director.

The Bank of Scotland fine comes at an unfortunate moment for the financial services industry, with regulators still considering whether to impose tougher rules on complaints handling. A consultation paper published by the FSA earlier this year includes proposals to force banks and other financial firms to disclose much more detail about the complaints they receive, which the regulator would then make publicly available to customers.

However, Peter Vicary-Smith, the chief executive of the consumer group Which?, said the Bank of Scotland case proved the FSA's proposals did not go far enough.

Which? has called for more enforcement action against the heads of complaints departments at the banks, as well as for new requirements to link boardroom pay and bonuses to complaints handling data.

"Not only was Bank of Scotlandmis-selling investment products to vulnerable consumers, then unfairlyrejecting their complaints, it was doing so while being bailed out by the taxpayer," said Mr Vicary-Smith.

"This case reaffirms the need for a fundamental overhaul of the way the banking industry deals with complaints."

The largest FSA fines

JP Morgan Securities Fined £33.3m last June for failing to ensure proper segregation of clients' money.

Goldman Sachs Fined £17.5m last September for failing to keep the Financial Services Authority appraised of an SEC investigation into its activities during the credit crisis.

Barclays Bank Fined £7.7m in January for the investment advice given to more than 12,000 customers to whom it sold savings plans.

Bank of Scotland Fined £3.5m yesterday for complaints handling failures.

Royal Bank of Scotland and NatWest Bank Fined £2.8m for a series of failures to properly investigate customers'complaints.

Zurich Insurance Fined £2.275m last August after the loss of personal details of 46,000 customers.

Société Générale Fined £1.575m last August for a series of transaction reporting failures.

News
Monkey business: Serkis is the king of the non-human character performance
peopleFirst Gollum, then King Kong - now the actor is swinging through trees in Dawn of the Planet of the Apes
Arts and Entertainment
Blackman: Landscape of children’s literature does not reflect the cultural diversity of young people
booksMalorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Sport
Thiago Silva pulls Arjen Robben back to concede a penalty
world cup 2014Brazil 0 Netherlands 3: More misery for hosts as Dutch take third place
Sport
Robin van Persie hands his third-place medal to a supporter
Van Persie gives bronze medal to eccentric fan moments after being handed it by Blatter
PROMOTED VIDEO
News
Ian Thorpe had Rio 2016 in his sights
people
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

News
scienceScientists have developed a material so dark you can't see it...
Voices
Mrs Brown's Boy: D'Movie has been a huge commercial success
voicesWhen it comes to national stereotyping, the Irish know it can pay to play up to outsiders' expectations, says DJ Taylor
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Life and Style
Once a month, waistline watcher Suran steps into a 3D body scanner that maps his body shape and records measurements with pinpoint accuracy
techFrom heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
News
Soft power: Matthew Barzun
peopleThe US Ambassador to London, Matthew Barzun, holds 'jeans and beer' gigs at his official residence. He says it's all part of the job
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
Gavin Maxwell in Sandaig with one of his pet otters
peopleWas the otter man the wildlife champion he appeared to be?
News
Rowsell says: 'Wearing wigs is a way of looking normal. I pick a style and colour and stick to it because I don't want to keep wearing different styles'
peopleThe World Champion cyclist Joanna Rowsell on breaking her collarbone, shattering her teeth - and dealing with alopecia
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

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over the northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

Otter man Gavin Maxwell's bitter legacy

The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

Joanna Rowsell: 'I wear my wig to look normal'

The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

Bill Granger's quick and delicious marinades

Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport