Lloyds mortgage arrears scandal are you owed money?

Hundreds of thousands of borrowers will receive reinbursements after Lloyd's Banking Group admitted to failings when handling mortgage arrears – even

Hundreds of thousands of borrowers will receive reinbursements after Lloyd’s Banking Group admitted to failings when handling mortgage arrears – even if they weren’t directly impacted by the issue.

The UK’s biggest high street lender unveiled the cost of the redemption programme in its half-year results, where it also revealed it would reserve an extra £700 million to cover further payment protection insurance (PPI) claims.

Lloyds has set aside £283 million in a ‘conduct provision’ fund to cover the mortgage arrears payments which it estimates will be paid to 590,000 borrowers who fell behind on mortgage payments between 2009 and 2016.

What’s happened?

Lloyds borrowers who fall behind on monthly mortagage payments can agree a payment plan. This involves a thorough affordability assessment to check new payments are set at the right level and arrears fees are charged for the extra work.

[Read more: Government consulting on plans to ban rip-off leasehold fees]

But the bank admits that, when borrowers fell into arrears between January 2009 and January 2016, advisors didn’t always do enough to ensure payment plans were affordable and sustainable.

As a result some customers may have been inappropriately charged.

After consulting with the Financial Conduct Authority (FCA), Lloyds has now agreed to a redress scheme that will refund all fees charged to 590,000 customers for arrears management and broken payment arrangements over the seven-year period, even those not impacted by the failings.

Jonathan Davidson, executive director of supervision for retail and authorisations at the FCA, said: “Ensuring fair treatment of customers, especially those in financial difficulties or who are vulnerable, is a key priority for the FCA. We continue to engage with Lloyds as it works to improve the way it treats customers in arrears.”

Stephen Noakes, group customer services director, Lloyds Banking Group, said: “We apologise to customers who were affected and are proactively reimbursing them as quickly as possible.

“We have taken significant steps to address this situation and prevent it from happening again. These measures include ensuring consistency of in-depth income and expenditure reviews, colleague training, strengthening management controls and reviewing fee charging.” 

How much can you get?

The £283 million redress scheme will refund the accrued interest on all fees up to the redemption date or, where customers have already paid the fees, the date when the fees were paid.

Lloyds will also pay an extra 8% interest to customers that were deprived of funds.

Customers will also be able to make a claim for the distress and inconvenience caused by the experience.

In addition, Lloyds will ask borrowers to consider if they suffered any consequential losses as a result of the arrears handling, such as a direct debit fee charged because of a broken payment plan.

How to claim a refund and compensation

The FCA says that Lloyds will write to all affected customers to explain the level of refund they will receive and explain how to claim extra compensation. 

Borrowers do not need to take any action until they are contacted by Lloyds.

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