TSB Bank Fined £10.9 Million for Mishandling Customers in Financial Hardship, Pays £99.9 Million in Redress

TSB Bank has been fined £10.9 million (U.S. $14.2 million) by the Financial Conduct Authority (FCA) for its poor treatment of retail customers who were in arrears on mortgages, credit cards, loans, and overdraft accounts. The FCA revealed that the bank failed to have adequate controls in place to ensure that customers experiencing financial hardship were treated fairly, according to a press release issued Wednesday.

In addition to the fine, TSB also paid £99.9 million (U.S. $129 million) in redress to the affected customers, the FCA noted. The agency stated that between June 2014 and March 2020, TSB’s repayment plans for customers struggling with its loan and borrowing programs were unrealistic and often unaffordable. The proposed fees for nearly 233,000 customers were deemed inappropriate.

Concerns about TSB’s collections and recovery actions were first raised by the bank itself, as well as during TSB supervision work, in December 2016. However, according to the FCA’s final notice, TSB did not take adequate action to resolve these issues.

In July 2020, the FCA required the appointment of a skilled person to conduct an independent review of TSB’s collections and recovery processes. The review, which ran from 2020 to 2023, received TSB’s full cooperation, the agency said.

Following the review, the FCA determined that TSB needed to implement a comprehensive compliance system to address its failings in handling customers in arrears. The overall cost of rectifying these issues amounted to £105 million (U.S. $137 million) for the bank.

TSB received a 30 percent discount on its fine for coming into compliance, reducing the original penalty from £15.6 million (U.S. $20.3 million). "TSB’s woeful systems and controls exposed its customers to risk of harm and meant it missed opportunity after opportunity to do the right thing," said Therese Chambers, joint executive director of enforcement and market oversight at the FCA. "While it did take action, it took us instigating a review before it acted effectively to address all the issues," she added.

TSB was not immediately available for comment.

By fLEXI tEAM