Taxpayer-backed Lloyds facing fine as City watchdog launches probe into claims it paid huge bonuses to staff who mis-sold financial products

| September 6, 2012 | 0 Comments

  • A probe into banks’ incentive schemes uncovered ‘serious’ failings at Lloyds, which now faces further investigation and a potential penalty
  • The investigation by the FSA found 22 banks, building societies and insurers were incentivising staff to mis-sell
  • It found staff were given huge bonuses and others were lying and cheating customers for cash
  • New FSA boss Martin Wheatley says the culture has to stop within 18 months
  • ‘Financial institutions have changed their view of consumers from
    someone to serve to someone to sell to,’ he said

Becky Barrow and Dan Hyde

08:34 EST, 5 September 2012


03:16 EST, 6 September 2012

The staggering extent to which high street bank staff chasing bonuses and commission are routinely ripping off customers was laid bare in a scathing report yesterday.

At the same time, the Daily Mail can reveal that 40 per cent of staff at Lloyds Banking Group earn extra payments if customers are persuaded to buy additional financial products.

They get bonuses if they can entice millions of loyal account holders to fork out for costly insurance policies or ‘premium’ current accounts which charge a monthly fee.

Probe: Lloyds Banking Group is facing further investigation and a possible penalty following an FSA investigation into 'dysfunctional' incentive schemes in the banking sector

Probe: Lloyds Banking Group is facing further investigation and a possible penalty following an FSA investigation into ‘dysfunctional’ incentive schemes in the banking sector

Separately, in a report by the
Financial  Services Authority regulator, published  yesterday, account
holders were said to be viewed only as ‘sales targets’ exploited by 
‘pile it high and sell it quick’ tactics that verge on the criminal.

Banks were told to clean up their act or face a major clampdown.

The FSA’s report into the incentive payments has brought another day of shame for Britain’s financial industry.

It revealed that one firm has been
referred to its Enforcement and Financial Crime Division. Sources named
the bank as Lloyds, which is 41 per cent owned by the taxpayer.

Martin Wheatley: 'Financial institutions have changed their view of consumers from someone to serve to someone to sell to'

Anrgy: FSA boss Martin Wheatley says: ‘Financial institutions have changed their view of consumers from someone to serve to someone to sell to’

Ruthless salesmen were said to be so
desperate to meet sales targets that they even sell to family members
such as their elderly mothers or sisters.

Others were found guilty of colluding
to ‘intentionally overcharge’ a customer to trigger a bonus payout. The
report said that some firms pay a ‘Super Bonus’ of up to £10,000 to the
first 21 workers who meet a sales target.

In other cases, staff are not paid a
basic salary, which means their own financial survival depends on their
ability to sell, a situation the report warned ‘significantly’ increased
the risk of mis-selling.

Yesterday Martin Wheatley, of the FSA,
said: ‘Some time ago, financial institutions changed their view of
consumers from people to serve, to people to sell to.’

He read the riot act to the industry –
which also includes insurers and investment firms – telling companies
to ‘clean up their act’ or face a clampdown in the next 12 to 18 months.

Firms can continue to pay commission, but such payments must benefit the customer, not the salesmen.

‘It has been too easy, for too long,
for those selling or giving advice to be motivated solely by the rewards
on offer to them, rather than how to enrich their customer,’ he said.

‘We all know what it is like to walk
into a bank to do something simple, like paying a credit card bill, only
for the person behind the counter to ask if you would like to extend
your credit, take out more insurance or look at their competitive
mortgage rates?’

He warned some of the mis-selling was ‘very close to fraud, which is a criminal offence’.

Crackdown: Watchdog says cultural change is needed and chief executives are ultimately accountable for the way their staff are incentivised

Crackdown: FSA says cultural change is needed and chief executives at top banks are ultimately accountable for the way their staff are incentivised

The scale of the mis-selling is shocking in an industry which provides products essential to the lives of millions.

Of the 22 firms investigated by the
FSA between September 2010 and September 2011, 20 were found to have
‘features in their incentive schemes that increased the risk of

The report highlights one salesman ‘blatantly misleading’ a customer to scoop £1,000.

In another case, two salesmen
‘colluded to intentionally overcharge’ a customer because the bonus was
linked to the amount that the client had agreed to pay for the product.

Yesterday the Financial Services
Consumer Panel criticised the FSA for being ‘slow to respond’ to a
problem which has existed for decades.

Chairman Adam Phillips said: ‘The
regulator has made a commitment to change the industry’s behaviour. We
hope that this time the industry will get the message and not try to
find a way to get around the rules as they have done in the past.’

Lloyds Banking Group said it had made
significant changes to its incentive schemes this year, adding: ‘Today
these schemes reward staff for providing high quality customer service,
assessed by a wide range of metrics.’

But it confirmed that around 40,000 of its 100,000 staff were eligible for incentive schemes.

I wasn't told about the fees
Tricks of the trade


On serving customers:
‘Why is it that every time I walk into the bank to do something simple, like pay my credit card bill, the person behind the counter asks me if I would like to extend my credit, take out more insurance or look at their competitive mortgage rates?

‘When did this happen? Banks for me used to be a service – a place where you would go in, stand in a queue, have a pleasant chat with the clerk and go about your daily business. Some time ago, this changed – financial institutions have changed their view of consumers from someone to serve to someone to sell to.’ 

On why selling financial products is different from flogging fast food or TVs:
‘This is not like when you go to a fast food restaurant and the server asks ‘do you want fries with that?’, or ‘do you want to go large?’. We all know they ask these questions because they are encouraged to make the most of every sale, and when customers are standing at the counter, they are more likely to say yes. But then we also know what to expect – chiefly lots of salt, calories and a bigger waistline.

‘But far fewer of us actually have such a clear understanding of financial services.  We also mostly trust those selling or giving advice to be acting in our best interests.

‘These are often complex and long-term products that turn into long-term problems if they go wrong.

‘The cost of going large may cost us a few pence – the cost of buying the wrong mortgage could see you lose your home.

‘And while it is annoying that when you buy a TV they only seem interested in selling you the warranty, that is nothing compared to trying to find a safe home for your money, only for the person in the bank to only seem interested in selling you a confusing product that could put your life savings at risk.’

On changing culture at the top:
‘Firms need to change how they incentivise their staff and learn to manage their risks. CEOs are ultimately accountable for the way their staff are incentivised, so we expect them to take a real interest in fixing this.  Recurring problems need to be investigated, action taken and redress paid to consumers who have lost out.

‘I want to draw a line in the sand here.’

The comments below have not been moderated.

I have a friend who worked as a clerk for this company. All they were concerned about were sales, and held meetings every week where they put pressure on the staff to sell financial products. This included quite heavy stuff, including threats about the security of their jobs if they didn’t meet targets. This person decided he’d had enough of this and called it a day, especially as he never signed up to be a sales rep in the first place.


06/9/2012 09:11

A neighbour where we lived in the 90’s worked for Lloyds and she was disgusted with what she was expected to do pressuring clients to keep her shop. Well looks like the Bank is getting it’s deserts! Shame is it will be others accounts raided to pay the fines and no doubt the executives will continue to take enormous bonuses.


06/9/2012 09:09

It is not fair to just pick on Lloyds, all banks are the same, they are driven by targets to sell this and that. If you were speak to most cashiers you would find they don’t like trying to sell things to people but have to do it to get a good end of year appraisal. They know people can’t afford the products but it is not them that set the targets, it is the management at all levels.

Fanatical northerner

06/9/2012 08:59

I work for a part of the lbg in a sales position and I can only repeat what’s been said so far. don’t blame the frontline staff, they got nothing to do with it. we get monthly targets, x amount of account upgrades, x amount of reviews in branch etc. with that comes utilisation targets, ie how often do you go to the toilet, if its too often, you have to work time back. I hardly hit my targets and at the moment I’m on an informal action plan due to pregnancy related illness (they couldn’t make it formal, would be illegal)… its not fun or easy to work for ANY bank. the fsa must change the rules, a bank should serve, not sell!

bank staff

06/9/2012 08:59

telephoning our bank about something, the advisor asked if the bank could give me information as to how our account could be made more `beneficial` to us.
handing me over to another account advisor, his only interest was to try and sell us some insurance. `are you still at that old game` i asked and he terminated the call.
banks have no interest in looking at people as customers. they resemble the cartoon character with the dollar/ pound sign in his eyes.

john back

06/9/2012 08:53

The only thing to stop all of this bad behaviour amongst banks is to nationalise them


wolverhampton, United Kingdom,
06/9/2012 08:49

I work for lloyds and I know nobody that would miss sell anything our targets are very high but would would only ever sell anything if it was beneficial to the customer, this article is poor and hurts the company and the staff that work there for a small wage with small bonuses, your story is full of false facts and your paper can pay a fine to the staff it is hurting by naming just one bank whilst stating many more. you want to run a story on Wonga, Quickquid, or Loanfinder they are companies that Mis Sell. poor poor report.


liverpool, United Kingdom,
06/9/2012 08:48

poor journalism to say theres 23 banks involved in miss selling then only name one ! must av been a slow news day !


liverpool, United Kingdom,
06/9/2012 08:42

Perhaps they should spend their time selling a few mortgages to first time buyers instead of harrassing people and trying to get them to buy products they don’t need !

Urban Legend

Edinburgh, United Kingdom,
06/9/2012 08:41

The ‘pre paid funeral’ offer from a major bank just had to take the cake. Some simple calculations would show that the amount paid in premiums would far exceed the benefits of their “funeral plan”, which in 30 years time wouldn’t be enough to buy a hamburger.

Dave Dee

06/9/2012 08:39

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