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
PROMOTED VIDEO
News
ebooksNow available in paperback
Life and Style
tech
News
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
film
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
News
Ruby Wax has previously written about her mental health problems in her book Sane New World
people
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

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas