MPs criticise Lloyds’ fraud system as ‘unfair’

LONDON (Reuters) – A group of lawmakers wrote to the financial regulator and the board of Lloyds Banking Group (LLOY.L) on Monday, accusing the bank of “victim blaming” and “unfairness” in its compensation package for victims of fraud at its HBOS Reading division.

The letters, signed by MP Kevin Hollinrake, who chairs the All-Party Parliamentary Group for Fair Banking, said the bank’s compensation offers were inadequate and it treated victims with contempt.

“We have no confidence in such an opaque process,” he continued in his letter to the Lloyds board.

“The arrogance of this approach can no longer be tolerated,” the letter said.

A Lloyds spokeswoman said the bank was in regular dialogue with Hollinrake and the APPG.

“The customer compensation review was put in place to provide prompt and fair compensation to customers,” she said, adding that the bank had paid for all customers to receive legal advice before reaching a settlement agreement.

Hollinrake’s letters cap weeks of renewed criticism of Lloyds’ handling of the fraud at HBOS Reading, one of Britain’s worst banking scandals that saw six people jailed for a total of 47 years last year.

The recent release of an internal Lloyds report into the 2013 fraud has raised questions about a cover-up. Meanwhile, regulators and law enforcement continue to investigate what happened.

Lloyds also instructed a retired judge to review whether Lloyds properly investigated the incident after suing HBOS in 2009.

“We are determined to find out the truth about what happened at HBOS Reading,” a Lloyds spokeswoman said.

TARGETED SMALL BUSINESSES

The fraud targeted small businesses in the bank’s impaired assets division, which were burdened with unmanageable debt and stripped of assets when they were unable to pay.

But in his letter to the regulator, the Financial Conduct Authority, Hollinrake said the APPG’s concerns “are not about past misconduct, but about the current treatment of victims of proven fraud”.

He referred to the senior executives regime, which aims to make financial firm executives more accountable, and asked the watchdog to say what powers it had to rectify the problems he had described.

He said the bank had attacked the victims’ character, refused to discuss the methodology used to calculate its offers or justify its decisions, and abused its resource power by refusing to make interim payments for legal representation.

Lloyds’ statement did not address the specific concerns raised by Hollinrake.

(Reporting by Emma Rumney; Editing by Lawrence White, Adrian Croft and David Evans)