Lloyds Banking Group has been hit with a record £28 million fine for "serious failings" in their bonus schemes for sales staff by the Financial Conduct Authority (FCA).
"The findings do not make pleasant reading," said FCA director Tracey McDermott. The fine came after the City watchdog investigated the sale of investment products like share ISAs and protection products like critical illness or income protection between 1 January 2010 and 31 March 2012. The failings affected branches of Lloyds TSB, Bank of Scotland and Halifax.
The FCA concluded: "The incentive schemes led to a serious risk that sales staff were put under pressure to hit targets to get a bonus or avoid being demoted, rather than focus on what consumers may need or want. In one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted."
The FCA said that risky incentive schemes meant there was a "significant risk" advisers at Lloyds and Bank of Scotland "would maintain or increase their salaries, and earn bonuses, by selling products to customers that they did not need or want."
Reasons Why The Banks Aren't Yet In Order
McDermott said: "Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first - but firms will never be able to do this if they incentivise their staff to do the opposite."
"Because there have been numerous warnings to the industry about the importance of managing incentives schemes, and because Lloyds TSB had been fined in 2003 for unsuitable sales of bonds, we have increased the fine by 10%."
The FCA said both Lloyds and the Bank of Scotland had since made "substantial changes" and had agreed to review sales by advisers to "pay redress where unsuitable sales took place".