HBOS fraud compensation scheme had ‘serious shortcomings’, report finds
Lloyds boss António Horta-Osório said he is “very sorry” and promised to follow the recommendations.
A scheme to compensate customers caught in a quarter-of-a-billion pound scam at a HBOS branch in Reading had “serious shortcomings”, an independent report has found.
Sir Ross Cranston, a law professor at the London School of Economics, said that Lloyds, which took over HBOS in 2008, must go back to the drawing board and re-assess customers’ compensation claims.
An initial review of how to compensate victims was lead by another academic, Russel Griggs.
Sir Ross said that parts of that customer review were good. He especially praised “generous” awards paid out to customers for distress and inconvenience.
Sir Ross has concluded that customers may not have received fair outcomes due to flaws in the review process. I am very sorry that this has happened Antonio Horta-Osorio, Lloyds chief executive
But, he added: “Despite the merits of the customer review, I have concluded that it had serious shortcomings. The most serious shortcoming concerned the bank’s approach to assessing direct and consequential loss caused by the criminal misconduct.”
Lloyds said it accepted the customer review did not deliver “fair and reasonable” offers of compensation, which was its purpose. It said Sir Ross’s recommendations would be fully implemented.
“Sir Ross has concluded that customers may not have received fair outcomes due to flaws in the review process. I am very sorry that this has happened,” said Lloyds chief executive Antonio Horta-Osorio.
The report found that although Lloyds should re-assess claims, many customers may may already have been paid all the compensation they are due because of the generous distress and inconvenience payouts.
“It may be that the reassessment process does not result in a materially different outcome for many customers. The key difference, however, will be that their claims will have been properly addressed, in an open and transparent manner,” the report found.
Between 2003 and 2007, financiers at the branch defrauded several businesses, including one run by TV star Noel Edmonds. Many were forced to close down after the event.
Two employees and four others were jailed in 2017 for the £243 million loans scam. Victims claim the figure could be as high as £1 billion.
The bankers referred businesses to a turnaround consultancy and stacked fees on top of them, increasing debt, destroying some of the businesses according to victims. They then splurged the money on prostitutes and luxury holidays.