The Financial Conduct Authority (FCA) has fined TSB Bank £10.9 million for its poor treatment of customers who fell into financial difficulty. An investigation revealed that the bank’s inadequate systems and controls led to unfair outcomes for customers in arrears on mortgages, credit cards, loans, and overdrafts.

Between June 2014 and March 2020, TSB’s repayment plans often lacked realistic terms, leaving customers, especially vulnerable ones, at risk of unaffordable agreements. The bank’s staff, lacking adequate training, were not fully equipped to understand individual customer circumstances, while incentive schemes pushed them to focus more on the number of payment plans rather than their suitability. This approach increases stress and uncertainty for those already facing financial challenges.

The FCA ordered an independent review in 2020, which exposed these shortcomings. While TSB had identified potential issues as early as 2016, meaningful corrective action was only taken following the review. As part of the resolution, TSB paid £99.9 million in compensation to over 232,000 affected customers and invested £105 million in addressing the failures.

The FCA continues to monitor financial institutions to ensure they have proper systems in place to support customers in financial distress, reinforcing the expectation that banks treat their clients fairly in difficult times.

Key Takeaways for Consumers

In light of the recent £10.9 million fine imposed on TSB Bank by the Financial Conduct Authority (FCA) for its inadequate treatment of customers in financial difficulty, it’s essential for consumers to understand their rights and the implications of this case. 

The failings identified highlight critical issues in how financial institutions handle arrears and support customers facing challenges. Here are the key takeaways that every consumer should be aware of to ensure they receive fair treatment and support during difficult financial times.

1. Expect Fair Treatment in Financial Hardship: Banks are required to provide fair and reasonable support if you’re facing financial difficulties. If you’re in arrears, repayment plans should be realistic and based on your individual circumstances.
2. Inadequate Support Can Lead to Compensation: If a bank fails to treat you fairly while you’re in financial difficulty, as in TSB’s case, you may be entitled to compensation. Over 232,000 TSB customers received redress for the bank’s failures.
3. Banks Must Have Proper Systems in Place: Financial institutions should have well-trained staff and effective systems to assess your financial situation properly. Poor training and pressure on staff to create payment plans quickly can lead to unrealistic arrangements that worsen financial stress.
4. Regulatory Oversight Protects Consumers: The FCA monitors and investigates banks to ensure they comply with regulations designed to protect consumers. If a bank doesn’t act properly, regulatory action can force them to address the issues and compensate customers.
5. Vulnerable Customers Are Particularly at Risk: Those facing financial hardship, especially vulnerable customers, need to be cautious. If a bank’s practices seem unfair or unmanageable, it’s important to seek advice, as there are regulatory bodies that can help.