“Champagne Bonus” and “Serious Failings” Lands Lloyds Record Fine

Lloyds bank have been handed a record breaking fine from the Financial Conduct Authority (FCA) for “serious failings” relating to their bonus schemes and sales incentives.

Lloyds bank has offered an apology to its customers after the FCA fined the group £28 million for highly pressurised bonus incentives where employees faced substantial pay cuts for failing to meet sales targets. Employees at Lloyds TSB were offered a “champagne bonus” of 35% of their monthly salary for meeting targets, while Halifax and Bank of Scotland offered “grand in your hand” rewards on a monthly basis.

According to the FCA’s report, more than 200 Lloyds TSB sales advisers were rewarded with bonuses despite the fact that they had mis-sold unsuitable or potentially unsuitable products to their customers. Offering an insight into the highly pressurised sales environment, the FCA revealed that in one case “an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted”.

Richard Lloyd, Which? Executive Director responded to the FCA’s findings:

“It’s right that in this case the FCA is taking strong action by imposing their largest fine. This should send a clear message to the banking industry that mis-selling won’t be tolerated and that customers, not sales, must come first”

For Lloyds, their £28 million penalty, follows a history of scandal and fines, the bank was handed a £1.9 million fine in 2003 for mis-selling “precipice bonds” coupled with a £100 million compensation bill, and have so far set aside £8 billion to compensate victims of the mis-selling of PPI, the biggest compensation pot out of all the UK banks.

While the bank will be offering redress to eligible customers and have issued an apology to those who were mis-led as a result of their sales incentives, we need to see a ‘big change’ in banking from Lloyds as well as the entire industry if customers are expected to trust the companies responsible for handling and banking their hard earned cash.

In the same week the scandal surrounding Lloyds hit headlines, the British Chambers of Commerce (BCC) announced that the UK economy is set to surpass its pre-recession peak next year. We need to see UK banks supporting the economic recovery and most importantly put an end to their irresponsible sales incentives and mis-selling scandals.