On 9 October 2024, the Financial Conduct Authority (FCA) issued a final notice to TSB Bank plc, imposing a £10,910,500 financial penalty. This notice was the outcome of a thorough investigation into TSB’s management of retail customers in arrears or financial difficulties between June 2014 and March 2020. The penalty reflects significant failings in TSB’s treatment of financially distressed customers and underlines the importance of robust systems and fair treatment in the banking sector.

Summary of the FCA’s Findings

The FCA’s investigation revealed that TSB breached two core Principles for Businesses over the relevant period:

1. Principle 3: Management and Control – TSB failed to organise and control its arrears management processes responsibly and effectively, highlighting deficiencies in policies, staff training, systems, and testing.

2. Principle 6: Customers’ Interests – The bank did not pay due regard to the interests of its customers and failed to treat them fairly, especially those who were vulnerable or experiencing financial hardship.

Key Issues Identified

The FCA’s report outlines several systemic issues within TSB’s operations:

• Inadequate Assessment of Customer Circumstances: TSB did not always perform thorough affordability assessments, resulting in unsuitable or unsustainable repayment plans for customers.
• Failure to Offer Appropriate Forbearance: Customers in financial distress were not consistently offered suitable forbearance options, and in some cases, were pressured to make payments before accessing support.
• Unfair Fees and Charges: TSB applied fees and charges that did not align with the customers’ financial situations, exacerbating their financial difficulties.
• Lack of Effective Communication: Errors and poor communication practices led to customer confusion and stress, sometimes exacerbating their financial situations.
• Inadequate Training and Incentives: Staff were not sufficiently trained to handle customer vulnerabilities, and incentive schemes potentially encouraged practices that did not always align with fair customer treatment.

Remediation Efforts by TSB

Despite these failings, TSB has undertaken significant efforts to rectify past mistakes:

• Redress Programme: TSB has compensated 232,849 customers, with redress payments totalling £99.9 million, covering wrongfully applied fees and charges plus interest.
• Policy and System Upgrades: The bank has improved its systems and controls, enhancing customer journey processes to prevent similar issues in the future.
• Comprehensive Training Initiatives: New training programs are now in place to ensure staff can adequately identify and support vulnerable customers.

Implications for TSB and Its Customers

The FCA’s actions serve as a stern reminder of the obligations banks have towards their customers, particularly those in financial distress. For TSB customers, these steps mean an improved service experience, with better protection and support mechanisms ensuring fair treatment for all.

The outcome also highlights the importance for all financial institutions to continuously review and update their processes and policies, ensuring alignment with regulatory expectations and customer needs.

Conclusion

The FCA’s final notice against TSB signifies a critical step in rectifying past injustices in customer treatment during financial distress. It also sets a precedent for how regulatory bodies can enforce compliance within the financial services industry. As a customer, it’s essential to be aware of your rights and the standards your bank is held to, ensuring you receive the fair treatment you deserve.

For further details on the FCA’s findings and TSB’s remediation efforts, you can view the complete final notice on the FCA’s website or contact TSB directly for more information about any compensation you might be entitled to.

TSB Fined £MM’s. We have just put a podcast, briefing doc and FAQs about this case on our website at https://bit.ly/FCADeepDive for anyone who wants a quick summary.

Lee Werrell

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