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.

Arts and Entertainment
books
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
PROMOTED VIDEO
Life and Style
3D printed bump keys can access almost any lock
techSoftware needs photo of lock and not much more
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
News
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
The Digicub app, for young fans
advertisingNSPCC 'extremely concerned'
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
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

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution