- Overview: This is another FCA fine in connection with treatment by a bank of borrower customers, particularly with regards to the application of forbearance for vulnerable and other customers in arrears or in financial difficulty.
- Relevant period: The misconduct spanned nearly a six year period between 2014 and 2020.
- Breaches: The FCA found that TSB was in breach of Principle 3 (systems and controls) and Principle 6 (treating customers fairly). The findings were based on the outcome of a skilled person review (under s.166 FSMA) which took place in stages between 2020 and 2023 and which found that in 55% of a sample of 400 customer files customers experienced unfair outcomes. TSB agreed that the FCA could rely on these findings for the purposes of the enforcement action.
- What did the FCA find:
- Some customers placed into the collections and recoveries process were at risk of unfair treatment with examples including:
- inadequate customer assessment with regards to financial position and affordability resulting in unaffordable repayment plans and failure to identify vulnerable customers (examples in the Notice include a staff member suggesting a customer make sandwiches for their son instead of paying for school meals);
- forbearance options not being offered or not fully explored, pressure on customers to make payments to access forbearance options, assistance sometimes lasting longer than necessary resulting in longer terms and higher charges (examples in the Notice include a staff member asking whether a customer could borrow money from family or friends);
- inappropriate interest, fees and charges with regards to both TSB policies and procedures and the customer’s circumstances and not suppressed when they should have been (an example in the Notice references arrears fees being applied to a customer in a care home after an Alzheimer’s diagnosis); and
- errors and poor or missing communications including where TSB did not have up to date addresses for customers (an example of an error included a payment being applied as a debit rather than a credit resulting in the improper commencement of litigation).
- When issues were raised, including by TSB’s parent following its own remediation process and by internal 2LOD and 3LOD reviews, the bank’s response was inadequate.
- Key root causes:
- Policies and procedures contained requirements which increased the risk of unfair outcomes such as requiring customers to make a payment before offering a forbearance arrangement.
- Training didn’t equip staff to ask customers the right questions about their financial position and ability to repay or the range of forbearance options.
- Incentivisation programmes had the potential to encourage staff to prioritise the number of payment arrangements made (ahead of appropriate customer discussions).
- Automated processes didn’t function as intended and there were instances of customers being charged two arrears fees in a single period or accounts not being moved to the next stage in the collections and recoveries process.
- Internal testing focused on single customer interactions rather than the whole customer experience so senior management didn’t have adequate information.
- Assurance reviews attributed root causes to staff errors without recognising wider issues and did not include a review of policies and procedures or training.
- Remediation: TSB paid £99.9m in respect of over 270,000 customer accounts at a total cost of £105m. The remediation extended to customers in arrears outside the relevant period and where it was not clear that detriment had occurred “ensuring no customers were left out”. TSB also took considerable steps to remedy failings in its systems and controls and dedicated “considerable resources” to making improvements.
- Penalty: £10,910,500 including 30% discount for early settlement. No disgorgement was applied in recognition of the remediation exercised which negated any financial benefit to TSB from its arrears handling. However, the starting point for the calculation of the penalty was 10% of the fees and interest charged by TSB during the relevant period to customers in arrears who were at risk of unfair treatment. Aggravating factors included failure by senior management to take action sooner. Mitigation took into account the remediation programme and acceptance of the skilled person’s findings. Balancing the aggravating and mitigating factors, the FCA gave TSB an overall significant reduction of 40%.