TSB has been fined £10.9 million over its treatment of customers in financial difficulty

TSB Bank has been fined £10.9 million for failing to treat struggling customers fairly when they fall behind on their loans.

The bank has paid almost £100 million in compensation to the 232,849 mortgage, overdraft, credit card and loan customers affected.

The Financial Conduct Authority (FCA) said TSB was at risk of making unaffordable payment arrangements with troubled customers or charging them inappropriate fees because it lacked appropriate systems and controls to ensure fair outcomes.

Therese Chambers, joint executive director of enforcement and market surveillance at the FCA, said: “TSB’s woeful systems and controls exposed its customers to risk of harm and caused it to miss opportunity after opportunity to do the right thing. Although action was taken, an assessment was necessary before effective action was taken to address all issues.”

“When you get into trouble, you hope for – and we expect – fair treatment so that a stressful situation does not worsen.”

For six years, the bank’s inadequate processes created a “real risk that repayment plans were not realistic,” the regulator said.

The training program failed to fully help staff understand customers’ circumstances.

“Staff may have been encouraged by incentive schemes to prioritize the number of plans made over taking sufficient time to assess the customer’s individual circumstances. As a result of its shortcomings, TSB risked making unaffordable payment arrangements with customers in difficulty or charging them inappropriate fees. This risked more uncertainty and stress, including for vulnerable customers,” the FCA noted.

The deficiencies occurred between June 2014 and March 2020.

The extent of the shortcomings was identified by an independent investigation into TSB’s treatment of customers in arrears, ordered by the FCA in July 2020.

The regulator said TSB was aware of potential problems with its systems as early as December 2016, but it was not until the 2020 review that TSB took “effective action to fully address them”.

TSB was said to have been fined £15.6m but agreed to resolve the issues identified by the FCA, meaning the fine was reduced by 30 per cent.

A TSB spokesperson said: “These are historic issues and we have contacted all affected customers to apologize and compensate them for not providing the level of service we should have. We resolved the underlying problems some time ago and significantly improved our support for customers in financial difficulties.”