The Co-operative Bank was punished by the regulator yesterday after it delayed valid claims for payment protection insurance (PPI) compensation “for no good reason”.
The Financial Services Authority (FSA) said it was likely that a significant proportion of 1,629 complaints were unfairly put on hold by the Co-op while a judicial review into PPI complaints was in progress.
Issuing a fine of £113,300, the FSA said it had made clear to the industry that many claims should continue normally while the review was taking place.
Despite the warning, the Co-op put in place a policy that was likely to lead to complaints not being dealt with properly during the legal proceedings, the FSA said.
The Co-op admitted that it had not lived up to its reputation for “doing the right thing” by customers in this instance, but said it is confident the delays will not be repeated.
The complaints were held back between January 21 2011 and May 9 2011, before the conclusion of an unsuccessful High Court challenge by the British Bankers’ Association (BBA) over FSA measures regarding PPI complaints.
The BBA confirmed in May 2011 that it would not appeal against the High Court’s decision that rules relating to the mis-selling of PPI could be applied retrospectively.
The regulator had sent out a letter to the industry in January 2011, warning firms that they risked enforcement action if they failed to treat complaints fairly. The letter said that many claims should continue as normal during the legal proceedings.
The FSA said that it had examined a sample of the complaints that the Co-op had put on hold – and found that all of them could have been processed.
While no one suffered any extra financial loss as a result of the delays, a significant number of people had to wait for longer for their complaints to be cleared up, the FSA said.