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Co-op Bank fined £113,000 over PPI delays
Co-operative Bank, the 'ethical' bank trying to become the fifth force in British banking, has been fined for putting customer complaints about PPI insurance on hold.
by Michelle McGagh on Jan 04, 2013 at 12:49
Co-operative Bank, the 'ethical' bank attempting to buy more than 630 branches from Lloyds, has been fined £113,300 by the City regulator.
The Financial Services Authority said the the Co-op had failed to process payment protection insurance (PPI) complaints from its customers fairly and quickly.
It put customer complaints on hold while its trade body, the British Bankers’ Association, made an unsuccessful legal challenge against the FSA's rules on how banks should deal with PPI cases.
This went against an instruction from the FSA which had previously written to banks telling them to continue processing PPI claims while the BBA challenge was on-going.
The letter also set out what types of complaints should be processed and warned that enforcement would be taken against banks that did not treat complainants fairly.
The FSA said that in the first half of 2011 Co-op had unfairly delayed a ‘significant proportion’ of 1,629 complaints from its customers over PPI cover they had taken when borrowing money from the bank.
Tracey McDermott, FSA director of enforcement and financial crime, said: ‘The FSA made it clear that firms must continue to process complaints where possible during the judicial review and we warned that enforcement action could be taken if this was not done.
‘Despite this warning, Co-op put in place a policy that was likely to lead to complaints not being dealt with properly during the legal proceedings.’
McDermott said no complainants had suffered any financial loss but ‘Co-op’s actions meant that a significant number of people had the resolution of their valid complaints delayed for not good reason’.
In a statement, the Co-op said its behaviour had 'fallen short of the high standards rightly expected of us’ and said it would not happen again.
Co-op Bank is the banking and insurance arm of the Co-operative Group, which prides itself on an ethical approach to customers and business. Last year it agreed to buy nearly 5 million customers from Lloyds for the knock-down price of £350 million, after the bank was ordered by European regulators to dispose of more than 630 branches in return for its bailout by the UK government in 2008.
If completed the deal would make the Co-op the country's fifth biggest bank. However, recently there have been reports that Co-op and Lloyds are struggling to complete the transaction because of technical difficulties involved in the transfer.
So far banks have paid around £7.5 billion in compensation to customers who were required to take the costly and often ineffective insurance with their loans. Analysts reckon the bill could exceed £10 billion. Last year Co-operative bank set aside another £40 million, taking its total PPI provisions to £130 million.
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by Michelle McGagh on Jan 19, 2017 at 11:11