Financial regulator the Financial Conduct Authority (FCA) has fined Clydesdale Bank £20,768,300 over a number of issues regarding its handling of payment protection insurance (PPI) claims. This is the largest fine imposed by the FCA to date for failings relating to PPI.

The issues continued for more than two years, affecting complaints closed by Clydesdale between May 2011 and July 2013. The bank closed some 126,600 cases during this period, and the FCA says that up to a third of these complaints (42,200) may have been unfairly rejected as a result of these failings. A further 50,900 customers may have received insufficient redress.

The issues uncovered by the FCA included:

• Clydesdale had a policy of not conducting any searches for relevant documentation where the associated loan or mortgage had been repaid more than seven years prior to the PPI complaint, even though it was aware that documentation may still be available. The FCA did not criticise the policy of destroying certain documents after seven years, but does note that it was not acceptable to have automatically assumed all documents had been destroyed

• Clydesdale submitted false information to the Financial Ombudsman Service (FOS). The FOS began asking for documentary evidence that the bank had searched for documentation in some of the older cases, so Clydesdale started deleting certain information from its systems and producing false screen prints to make it look like the searches had been unsuccessful. This is perhaps the most startling revelation in this case, and the conduct was described as “particularly serious” by Georgina Philippou, acting director of enforcement and market oversight at the FCA. However, the FCA has accepted that the practice was undertaken by one team within the bank’s complaint handling operation, and that management were unaware of the issue and had not approved its staff acting in this way. This perhaps explains the lack of any action against a named individual.

• Training provided to complaint handlers was inadequate, and they were failing to consider all necessary information when considering a complaint. In particular, staff were not giving due consideration to existing sickness benefits provided by customers’ employers

Clydesdale has undertaken to review all its PPI complaints up to and including August 2014. All customers will be contacted regarding the outcome of this review, and will be offered compensation where it is due, however this process could take as much as 18 months to complete.

However, the case must be regarded as another example of the lengths banks and other financial institutions sometimes resort in order to avoid paying PPI compensation.

Acting chief executive of Clydesdale, Debbie Crosbie, said:

“In 2011 we introduced changes to our policies and procedures that were designed to help us respond to PPI complaints. A number of these changes were inappropriate and have disadvantaged some of our customers. We got this wrong and I am sorry for that.

“We deeply regret any instance which led to the Financial Ombudsman Service receiving incorrect or incomplete information from us. These practices were not authorised or condoned by the banks.

“As soon as this issue was discovered, we took immediate steps to stop it; we made the regulator aware and rapidly introduced strict new monitoring procedures to prevent any recurrence.”

Gillian Guy, chief executive of consumer advice body Citizens Advice, called on the banking industry to “end the PPI scandal”, and added:

“Clydesdale has let down customers twice: by mis-selling PPI and by not giving people the compensation they deserve. By providing false information to the ombudsman the bank also showed contempt to its customers.”

National Australia Bank Ltd has set aside a combined total of £806 million to pay PPI compensation to customers of its two UK subsidiaries – Clydesdale and Yorkshire Banks. These PPI issues could have affected customers of both Clydesdale and Yorkshire, as the legal entity fined by the FCA is Clydesdale Bank Plc, which operates both banking brands.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.