TSB fined £11m for mistreating customers, including one who died

Stay up to date with free updates

Simply register at UK Financial Regulation myFT Digest — delivered straight to your inbox.

TSB charged a deceased person fees for defaulting on their mortgage and told another borrower not to buy clothes or school meals for their children, UK regulators said, as they fined the bank £10.9m of pounds for failing to treat distressed customers fairly.

The Financial Conduct Authority said on Thursday that TSB’s “inadequate processes” between 2014 and 2020 “created a real risk that repayment plans were not realistic” for customers.

The fine comes as a hostile takeover bid for TSB’s Spanish owner Sabadell by bigger rival BBVA reignited a debate over the future of the UK lender, which six years ago suffered one of its biggest disruptions of IT in the sector, which left 2 million customers stranded. their accounts.

The FCA said on Thursday that TSB staff did not receive sufficient training and were “potentially encouraged by incentive schemes to prioritize the number of plans made over taking sufficient time to assess individual customer circumstances”.

TSB, which bills itself as ‘the local bank for Britain’, has told a woman struggling with her mortgage that she could skip buying clothes or school lunches for her children because it puts her on a repayment plan she doesn’t and could afford it.

“As a result of its failings, TSB risked agreeing unaffordable payment arrangements with customers in difficulty or charging them inappropriate fees,” the FCA found.

The FCA said TSB charged fees for a missed mortgage payment by a customer who died “where there was no grant of probate or personal representative, meaning there was no prospect of repayment activity having place in the account at that time”.

In another case, TSB sued a customer after mistakenly treating his large payment as a debit rather than a credit, which pushed him over the bank’s automatic threshold for outstanding customer disputes.

In total, more than 200,000 mortgage, overdraft, credit card and loan customers were affected, costing the bank almost £260m in fees and interest, the FCA said. As a result, the Sabadell-owned bank paid almost £100m in compensation costs.

“TSB’s shoddy systems and controls exposed its customers to risks of harm and meant it missed opportunity after opportunity to do the right thing,” said Therese Chambers, the FCA’s joint executive director of enforcement and market surveillance.

The fine comes as the regulator increases its focus on fair treatment of customers through a new “consumer charges” regime introduced in July 2023.

TSB, which was spun out of Lloyds Banking Group after the financial crisis, floated on the London Stock Exchange in 2014 with ambitions to challenge the dominance of Britain’s big banks.

The aim was to capitalize on customers’ distrust of traditional banks and envisaged removing internal sales targets and offering customers higher interest rates. Less than a year later, it was bought by Sabadell in a £1.7bn deal.

TSB now has around 5 million customers and a loan book of £36bn.

TSB said these were historical issues and that the lender had contacted all affected customers to “apologise and reimburse them for not providing the level of service we should have”.

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

The lender co-operated with the FCA and qualified for a 30% reduction on a fine that would have otherwise been £15.6m.

TSB was ranked 13 out of 15 for service quality in an industry-wide customer survey by Ipsos last year and said this year it would close 36 of its 200 branches and cut 250 jobs from a total of over 5,000.