The Financial Conduct Authority announced that Lloyds had agreed to set up a £283m redress scheme to compensate mortgage customers, for failing to set up payment plans that were “affordable and sustainable”.
More than 590,000 customers are expected to receive redress payments from the bank.
Under the scheme, Lloyds will be refunding all the fees charged to customers for arrears management and broken payment arrangements from 1 January 2009 to January 2016. It will also offer payments for potential distress and inconvenience, as well as consequential loss, resulting from missed payments.
Refunds will be offered on the accrued interest on all fees up to the remediation date.
In another blow to the bank that is only several months free from government ownership, its profits were affected by higher than anticipated conduct charges, mostly stemming from its payment protection insurance scandal.
In its half year results, it confirmed PPI charges totalling £1bn had eaten into its statutory profit of £2.5bn. Relative to the previous year, this was still a 4% improvement.
The higher PPI costs were a blight on what The Share Centre’s investment research analyst, Helal Miah, calls a set of “respectable numbers”.
Underlying profit of £4.5bn was 8% higher over the first six months of the year and net income of £5.9bn was up 2%.
Shares in the bank were trading down by around 2% at 67.39p, shortly after the news broke on Thursday.
But Miah was somewhat surprised by shareholders’ shock over the higher PPI claims.
“For us, this does not come as too much of a surprise as provisions made last year seemed a little small and the looming deadline on PPI claims always meant that a rise was likely.”
On the contrary, “we believe the forward guidance by the bank should be welcomed by investors,” he added.
