* Lloyds failed to pay customers within 28-day deadline
* Lloyds apologises for 'administrative errors'
* FSA reported decline in payouts in December
* FSA says continuing to monitor PPI payouts
By Matt Scuffham
LONDON, Feb 19 Britain's financial regulator
fined Lloyds Banking Group 4.3 million pounds ($6.7
million) on Monday for not paying compensation quickly enough to
customers wrongly sold insurance on loans and mortgages.
The Financial Services Authority said that from May 2011 to
March 2012, Lloyds did not pay compensation to 140,000 customers
mis-sold payment protection insurance (PPI) within a deadline of
28 days after notifying them they were due a payment.
Britain's banks have set aside more than 12 billion pounds
to compensate customers wrongly sold policies meant to protect
borrowers who lost jobs or became ill, and Lloyds has made a
provision of 5.3 billion pounds, the highest of any bank.
But the regulator said nearly a quarter of Lloyds' customers
who were entitled to compensation did not receive a payment
within 28 days. Around 87,000 had not been compensated within 45
days, with 8,800 having to wait for more than six months.
Around 25,000 claims inadvertently "dropped out of the
process", the FSA found, and were only identified because
customers chased payments. It said that even when customers
inquired about why they had received no money, Lloyds was unable
to fast-track payments or explain why they had been delayed.
"Lloyd's PPI redress payment systems fell well below the
standard the FSA expects, and the size of this fine reflects how
seriously we view these breaches," said Tracey McDermott, the
FSA's director of enforcement and financial crime.
Lloyds has since paid the correct amounts and compensated
customers for the late payments, the FSA said.
The FSA said it was continuing to monitor how firms pay PPI
compensation. It fined the Co-operative Bank 113,300 pounds in
January for not dealing with complaints quickly enough.
Lloyds Banking Group said on Tuesday that it had not
anticipated the number of complaints it received and made
"administrative errors" while attempting to get on top of them.
"We acknowledge that this led to some customers not being
compensated on time and we apologise to those customers whose
payments were delayed," Lloyds said.
The FSA said on Monday that 360 million pounds was paid out
in PPI compensation in December, bringing the total amount so
far paid out to customers to 8.4 billion pounds.
However, that represented a drop in payouts for the third
month running, suggesting the number of genuine claims being
received by banks may have peaked.
PPI is the most complained about financial product ever in
Britain, with the financial ombudsman service receiving over
half a million complaints.