Britain’s Financial Conduct Authority imposed a record £28 million fine on Lloyds Banking Group for the way it encouraged staff to sell products worth £2 billion that customers did not need or want.
The FCA, launched in April to try and end Britain’s litany of mis-selling scandals in financial products spanning over two decades, said it was the largest ever fine imposed for failings by a bank in how it sold products to retail customers.
The fine was increased by 10 per cent because the watchdog’s predecessor, the Financial Services Authority, had already warned the bank about poorly managed incentive schemes over a number of years. Lloyds was also fined in 2003 for unsuitable sales of bonds.
“The incentive schemes led to a serious risk that sales staff were put under pressure to hit targets to get a bonus or avoid demotions, rather than focus on what consumers may need or want,” the watchdog said.
“In one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted.”
The watchdog said that Lloyds TSB and Bank of Scotland, both part of Lloyds Banking Group, had sales incentive schemes that created significant risk that advisers would maintain or bump up their salaries, and earn bonuses, by selling products to customers that they did not need or want.
The FCA’s probe covered the sale of products such as critical illness or income protection between January 2010 and March last year.
During this time over a million products were sold to about 700,000 people who invested roughly £2 billion.
“The findings do not make pleasant reading,” Tracey McDermott, the FCA’s director of enforcement, said.
Regulators published a review of incentive schemes which highlighted problems and said at the time one firm, now identified as Lloyds, had been referred to enforcement.