The problems have been mounting for the big banks in Australia, with mis-selling allegations flowing fast. We've had whistleblowers, mea culpas and the odd compensation scheme – see Screwed by the 'CAN' Bank, The financial planning quagmire and Another rotten apple on the main Intelligent Investor Share Advisor site for the sordid details.
So far, though, ASIC has resisted the urge to serve up any major fines – but it was shown the way overnight by the UK's Financial Conduct Authority (FCA), which has levied a £20.7m fine on Clydesdale Bank and Yorkshire Bank, UK offshoots of National Australia Bank (ASX: NAB). That's around $40m to you and me and is big bikkies even for a big bank.
The fine relates to problems with Clydesdale's handling of complaints for the mis-selling of private protection insurance (PPI), which is often sold alongside a loan to protect the creditor against default, but with the borrower paying the premium. A hefty commission ensured that the products were sold even when they weren't necessary. Hence the claims.
The FCA said that, of the 126,600 PPI complaints decided by Clydesdale Bank and Yorkshire Bank between May 2011 and July 2013, up to 42,200 may have been unfairly rejected and up to 50,900 upheld complaints may have resulted in inadequate redress. That means there were problems with almost three-quarters of complaints.
That's a dismal record and no doubt explains why the FCA's fine amounts to a whopping £222 ($431) per botched complaint.
We can only hope ASIC is paying attention.
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