Clydesdale Bank hit with record PPI fine for 'unacceptable' staff lies

The £20.7m fine is for a litany of abuses in handling payment protection insurance claims

(JASON ALDEN)

Clydesdale & Yorkshire Bank has been hit with a record £20.7m fine for a litany of abuses in handling payment protection insurance claims which went as far as misleading the Financial Ombudsman.

The "serious" failings meant nearly three-quarters of 126,600 complaints decided between May 2011 and July 2013 by the Clydesdale and its sister Yorkshire Bank may have been rejected unfairly or resulted in inadequate fines, the Financial Conduct Authority said.

The group is now reopening the files on 180,000 complaints dating back from August last year, which could result in bigger payouts for tens of thousands of customers.

The fine is the largest for PPI abuses ever handed out by the financial watchdog, and almost three times as high as the next biggest, a £7m fine handed out to the former Alliance & Leicester in October 2008.

Clydesdale, recently put up for sale by National Australia Bank, refused to search for documents relating to PPI on loans and mortgages beyond the bank’s seven-year retention period, despite some records being readily available. And when calculating redress for credit card PPI complaints, handlers ignored statements that Clydesdale held for the period before 2000.

In the most serious cases, a Clydesdale team altered printouts for the Ombudsman to make it look as if the bank held no relevant documents, and deleted PPI information from printouts listing products sold to the customer. Management were unaware of the practice. A Clydesdale spokesman refused to say if the staff behind the worst practices had been sacked, saying only that they had been “subject to disciplinary action”.

Georgina Philippou, the FCA’s acting director of enforcement and market oversight, called the bank’s behaviour “unacceptable”. “The fact that Clydesdale misled the Financial Ombudsman by providing false information about the information it held is particularly serious and this is reflected in the size of the fine.” The watchdog said the fine would have been even bigger – £29.5m – if the Clydesdale had not opted to settle early in the process.

Clydesdale’s acting chief executive Debbie Crosbie gave a grovelling apology. She said: “In 2011 we introduced changes to our policies and procedures that were designed to help us respond to PPI complaints. A number of these changes were inappropriate and have disadvantaged some of our customers. We got this wrong and I’m sorry for that.”

On staff misleading the Ombudsman, she said: “These practices were not authorised or condoned by the banks. As soon as this issue was discovered, we took immediate steps to stop it.”

An even bigger bill for PPI could deter potential buyers for the two banks. NAB, which has owned Glasgow-based Clydesdale since 1987 and Yorkshire since 1990, said last October that it was considering a broad range of options for the banks, including a sale through public markets.

It also raised provisions by £420m last year in anticipation of a higher bill. So far its provisions total £806m, of which £291m has been paid out so far.

The FCA’s latest figures show that a total of £18.5bn has been repaid by the industry to mis-sold PPI customers since the beginning of 2011.