The Financial Conduct Authority is approaching issuing a total of £1bn in fines for arrears breaches, Rockstead has pointed out.
Rockstead explained that, in just four FCA interventions, the cost of non-compliance is close to £1bn.
This is before factoring in the cost of management time sorting out the mess and does not include the cost of “misery and stress” for 4.5mn customers.
It also damages the firms’ reputation, something that will be more significant in the ongoing consumer duty world.
“We are not surprised; the cost of non-compliance is now so significant that no rational thinker can just write these amounts off as simply a cost of doing business,” Rockstead stated.
The most recent example of this is TSB Bank which was fined nearly £11mn for failing to ensure customers who were in arrears were treated fairly between 2014 and 2020,with close to £100mn in redress paid to nearly a quarter of a million customers.
Compounding matters, TSB became “aware of potential problems with its collections and recoveries in December 2016,” but it was not until the review in 2020 that “TSB took effective action to fully address them”.
Older examples of these fines include Lloyds Bank, Bank of Scotland, and The Mortgage Business which were fined £64mn for failures in mortgage arrears handling between April 2011 and December 2015.
They also paid out another £300mn in customer redress to around half a million customers.
Additionally, Barclays Bank and Clydesdale Financial Service Limited were fined £26mn for poor treatment of consumer credit customers in arrears between April 2014 and December 2018, and paid close to another £273mn in redress to around 1.5mn customers.
Meanwhile, HSBC and Marks and Spencer Financial Services were fined £6mn for failures in treating customers in arrears or financial difficulty fairly between June 2017 and October 2018.
Following these fines, Rockstead pointed out that conversations with its business partners have been “off the scale”.
“Everyone is shocked that collection teams are still getting it wrong.
“Be in no doubt, everyone is starting to question their own policies and procedures - again.”
tom.dunstan@ft.com
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