Lloyds has escaped a £167m penalty but has still been handed the largest ever retail fine by the FCA - £117m.
The sanction was given to Lloyds Bank Plc, Bank of Scotland Plc and Black Horse Ltd for failing to handle PPI complaints fairly.

Lloyds agreed to settle at an early stage of the investigation and therefore qualified for a 30 per cent discount. Were it not for this discount the FCA would have imposed a fine of £167,758,035.

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As a result of FCA action, Lloyds has set aside a total of £710m to cover any redress due to customers affected the relevant period - March 2012 to May 2013.

FCA officials said that during this period Lloyds assessed customer complaints relating to more than 2.3 million PPI policies and rejected 37 per cent of those complaints.

Firms are required to assess complaints impartially and can reject unfounded claims.

An FCA statement issued this morning read: “In March 2012, Lloyds issued guidance instructing complaint handlers that the overriding principle when assessing complaints was that Lloyds’ PPI sales processes were compliant and robust unless told otherwise (the Overriding Principle).

“In addition, Lloyds did not notify complaint handlers of known failings identified in its PPI sales processes during the relevant period.

“Some complaint handlers relied on the Overriding Principle to dismiss customers’ personal accounts of what had happened during the PPI sale or to not fully investigate customers’ complaints. In some instances, Lloyds did not contact customers to enable them to give their account of the sale.

“As a result of Lloyds’ misconduct, a significant number of customer complaints were unfairly rejected.”

Georgina Philippou, acting director of enforcement and market oversight at the FCA, said: “PPI complaint handling is a high priority issue for the FCA. If trust in financial services is going to be restored following the widespread mis-selling of PPI, then customers need to be confident that their complaints will be treated fairly.

“The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds. Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds’ conduct was unacceptable.”

According to the regulator Lloyds “knew there were significant sales process failures and mis-selling” despite insisting the process was robust.

The FCA statement said: “Some customers whose complaints were rejected were told that their complaint had been ‘fully investigated’ with ‘appropriate weight and balanced consideration [given] to all available evidence’, when this was not the case.

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“When assessing a customer complaint, the customer’s account of what had actually happened at the time of the sale was not always considered in a balanced way.

“Due to poor customer contact processes, some customers may not have had an opportunity to provide further evidence needed for complaint handlers to reach a fair outcome for their complaint.”

However, FCA officials said that Lloyds has made “significant progress towards the fairer treatment of customers in its general complaint handling operation” and has established an extensive remediation programme to re-review or automatically uphold approximately 1.2 million PPI complaints, including those within the relevant period.