Bank to offer compensation to 7,000 customers that could amount to more than £40m
High street banking stalwart Lloyds Banking Group could be forced to pay back more than £80 million ($102.83 million) to deal with a fresh mis-selling scandal, soon after the conclusion of the notorious payment protection insurance saga.
The Times reports on Friday that the bank has started the process of writing to more than 7,000 customers holding accounts with Lloyds and Scottish Widows, its investments arm, offering them compensation if they bought certain structured investment products in the past.
Many of these products were marketed when sold as being simple and low risk, but turned out to be highly complex instruments, with a pair of products called the Acorn Market Linked Deposit and Protected Capital Solution Funds at the centre of the issue. The funds were sold to customers of what was at the time Lloyds TSB and Scottish widows.
The product, which was sold by Lloyds TSB between 2008 and 2010 “was in breach of providing fair, clear and not misleading promotions, because it provides the consumer with a misleading impression of the likely return,” according to a Financial Conduct Authority letter cited by the bank’s trade union, the LTU.
The LTU wrote in a newsletter on Wednesday that it expects combined compensation to reach as much as £82 million for all the products.
“We estimate that the total amount of compensation will be £66 million. In addition, Scottish Widows is also paying out £18 million to 3,500 customers who were mis-sold Protected Capital Solution Funds. We expect that further product reviews will see more customers receiving compensation,” the union said.
Lloyds does not expect the bill to be as high, The Times reports.