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.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
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

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence