TSB fined £10.9m for dealing with customers in financial difficulty

TSB has been fined £10.9 million by the Financial Conduct Authority for its treatment of customers in financial difficulty over a six-year period.

The bank lacked adequate systems and controls to ensure that defaulting customers were treated fairly.

The bank’s “woeful systems” exposed its customers to “risk of harm”, the FCA said.

TSB has paid £99.9 million in compensation to the 232,849 affected mortgage, overdraft, credit card and loan customers.

The FCA found that between June 2014 and March 2020, TSB processes created a real risk that payment plans were unrealistic.

TSB’s collections and recovery policies contained requirements that increased the risk of unfair outcomes for customers, such as the requirement that TSB customers make a payment before a forbearance agreement would be offered in certain circumstances.

When a customer agreed to settle his arrears within a short period of time, TSB did not necessarily investigate the customer’s situation to determine whether he was in financial difficulty.

The FCA said TSB’s training did not fully help its staff understand customers’ circumstances.

Incentive schemes potentially encouraged staff to prioritize the number of plans made rather than taking sufficient time to assess clients’ individual circumstances.

As a result, TSB ran the risk of agreeing “unaffordable payment arrangements” with distressed customers or charging them inappropriate fees. This created a risk of uncertainty and stress, even for vulnerable customers.

The FCA identified the extent of the shortcomings through an independent review of TSB’s treatment of customers who had fallen into arrears, which was ordered in July 2020.

TSB became aware of potential issues in December 2016. However, it was not until the 2020 review that TSB took steps to fully address them.

TSB would have been fined £15.6m but agreed to resolve the issues, qualifying for a 30 per cent discount under FCA processes.

Therese Chambers, joint executive director of compliance and market oversight at the FCA, said: ‘TSB’s woeful systems and controls exposed its clients to the risk of harm and meant it missed opportunity after opportunity to do the right thing. “While he took action, it was necessary for us to initiate a review before he acted effectively to address all the issues.”

The FCA said TSB undertook a program to resolve these issues, costing £105 million.

A TSB spokesperson said: “These are historic issues and we have contacted all affected customers to apologize and refund them for not providing the level of service we should have.”

“We fixed the underlying issues some time ago and have significantly improved our support for customers experiencing financial difficulties.”