The Co-operative Bank has been fined £113,300 by the Financial Services Authority for failing to handle payment protection insurance (PPI) complaints fairly.
In a statement released by the FSA on Friday, the watchdog said the Co Op had incorrectly put PPI complaints on hold while it waited for the outcome of a High Court challenge from the British Bankers Association over new FSA - a challenge which failed and ruled in favour of the regulator.
"Co-op put these complaints on hold despite the FSA making it clear in a letter to the industry, dated 21 January, 2011, that many claims could be progressed normally while the judicial review was in progress. The letter also set out the types of cases that should be progressed," the statement said.
"It contained no new requirements and was simply a reminder of all firms' complaint handling obligations and the FSA's expectations. The letter also warned that enforcement action could be taken if firms failed to treat complainants fairly.
"The FSA found that between 21 January, 2011 and 9 May, 2011 it was likely that Co-op unfairly put on hold a significant proportion of 1,629 complaints, incorrectly deciding they could not be determined because the outcome of the judicial review would have a bearing on the final decision. The FSA's own review of a sample of the complaints put on hold revealed that 100% of the cases examined could have been progressed."
Tracey McDermott, the FSAs director of enforcement and financial crime, said that while nobody suffered any financial loss, Co-op's actions meant a significant number of people had the resolution of their valid complaints delayed "for no good reason".
Data released on 27 September by the Financial Services Authority showed complaints about general insurance and pure protection had risen by 99% to 2,541,430 - 88% of which were about PPI.
Around two-thirds of all PPI complaints have been upheld, and a total of £2.9m in compensation was paid out for insurance products, including PPI, with £3.2bn of redress paid overall in the first six months of this year.
On 11 September 2012, the Huffington Post reported on the PPI data from the Financial Ombudsman, which showed Barclays to have received the most complaints during a key six month period in 2012 with a total of 19,522.
Lloyds Bank 9,493 PPI complaints, while credit card specialist MBNA recorded 6,724. During the same period, Co Op recorded just 20 PPI complaints.
In October 2012, Barclays confirmed it had put aside £2bn to deal with PPI complaints; the Royal Bank of Scotland said it had put aside £1.7bn earlier that year.