TSB Incurred a £10.9 Million Penalty for Inadequate Systems and Handling of Struggling Customers' Cases Due to Poor Systems and Controls
TSB Faces £10.9 Million Fine for IT Migration Failures and Treatment of Customers in Arrears
In 2021, the Financial Conduct Authority (FCA) imposed a fine of £10.9 million on TSB due to serious failings in the bank's handling of a major IT migration in 2018 and its treatment of customers who had fallen into arrears.
The IT migration caused widespread system outages and access issues, leaving many customers unable to access their money or accounts online for extended periods. The disruption also led to delays in transaction processing and payments, causing frustration and financial distress among customers due to a lack of communication and slow issue resolution by the bank.
The FCA found that TSB’s inadequate planning, poor oversight, and ineffective incident management in executing and recovering from the IT migration failure resulted in harm to thousands of customers and undermined confidence in the bank's ability to operate reliably.
Furthermore, an independent review into TSB's treatment of customers who had fallen into arrears, ordered by the FCA in July 2020, identified the extent of TSB's failings. As a result of these failings, 232,849 customers were identified who suffered or were at risk of suffering loss. Between June 2014 and March 2020, TSB's inadequate processes created a real risk that repayment plans for customers struggling with mortgage, loan, or credit card debt were not realistic.
Many customers facing repayment difficulties on mortgages, overdrafts, loans, and credit cards were subjected to unaffordable payment arrangements or inappropriate fees. TSB's training did not fully support its staff in understanding customers' circumstances, and employees were potentially encouraged by incentive schemes to prioritize the number of plans made over taking enough time to assess individual customer circumstances.
In response to these findings, TSB has considerably enhanced its support for customers experiencing financial difficulty. The bank has made redress payments of £99.9m to affected customers and has resolved these issues at a cost of £105 million.
A TSB spokesperson stated, "These are historic issues, and we have contacted all affected customers to apologize and reimburse them for not providing the level of service we should have." The fine comes as the FCA has been intensifying its efforts to ensure banks treat customers fairly, especially since the introduction of Consumer Duty regulations.
It is essential to note that these issues affected customers with TSB and Whistletree brands. The FCA's joint executive director of enforcement and market oversight, Therese Chambers, stated that TSB's poor systems and controls exposed its customers to risk of harm and that the bank missed numerous opportunities to do the right thing. The FCA issued the penalty due to historic failings, stating that TSB previously lacked suitable systems and controls to secure fair outcomes for customers. The fine could have been £15.5 million but was reduced due to TSB's cooperation with the investigation.
[1] Source: Financial Conduct Authority (FCA) press release, 2021.
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