Lloyds Is Silent on Tide of Complaints; Wealth Management & Personal Finance; State-Owned Bank Could Face Huge Fine as a Leading Culprit in Damning FSA Report

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PRESSURE is mounting on Lloyds Banking Group to admit that it is at the centre of a major investigation into complaints mis-handling. This could lead to it having to review tens of thousands of complaints it has previously dismissed and could result in a substantial fine.

Lloyds was not explicitly named in a damning report published last week by the Financial Services Authority on the subject of poor complaints-handling by banks. But it is understood to have been identified by the FSA as one of two banks where customers' complaints were systematically treated unfairly. This could mean tens of thousands of complaints to the bank were wrongly rejected or inadequately compensated.

Lloyds refuses to confirm whether or not it is one of the two culprits. It says it 'never discusses' dealings with the FSA. But because Lloyds is now largely owned by taxpayers, having been bailed out in 2008, there are growing calls for it to be forced to be more honest with customers and the public.

Peter Vicary-Smith, chief executive of Which?, the powerful consumer lobby group, confirmed that he will be writing to Lloyds' chief executive Eric Daniels this week, asking directly whether the bank is one of the two cited by the FSA. Vicary-Smith will also write to Royal Bank of Scotland, the other bank which required rescuing by the public.

Lloyds is expected to face demands for information from other sources. Members of the influential Future of Banking Commission - which includes a number of MPs from all three political parties - are likely to ask Daniels for clarification before the Commission submits its report to the Chancellor of the new, post-Election Government.

Wider evidence of Lloyds' unfair handling of complaints is damning. Since its merger with collapsing rival HBOS it has 30 million customers and is the biggest bank. Yet it attracts disproportionately high levels of complaints.

As many as 500,000 Lloyds customers are estimated to have complained last year, but of these a far smaller number - just tens of thousands - end up being adjudicated by the independent Financial Ombudsman Service.

Customers have to take their complaint to the FOS themselves if the bank has rejected it. Most do not.

In the second half of 2009 about 20,000 complaints against Lloyds went to the FOS - about five times the number of complaints relating to either HSBC or RBS and twice the number relating to Barclays.

FOS figures show that many of these complaints - as high as 90 per cent for some Lloyds subsidiaries - are ultimately found in favour of the customer. These numbers suggest that Lloyds staff are routinely rejecting complaints regardless of their merits.

Lloyds may be the worst of the large banks but the problem exists elsewhere. Surging volumes of complaints, in particular regarding the mis-selling of overpriced and often useless loan repayment insurance, encouraged many banks to simply reject cases out of hand.

Traffic and highways draughtsman Ian Cranham is one of tens of thousands of borrowers to experience this treatment when he complained about having been mis-sold loan insurance by a bank, in this case HSBC. …