Customer complaints were unfairly rejected by the Bank of Scotland.
Consumers who deserve compensation will be notified by the bank.
The Bank of Scotland has been fined £3.5 million by the Financial Services Authority (FSA) for mishandling customer complaints and will have to provide £17 million in compensation to affected consumers.
The penalty was imposed on Wednesday after the FSA concluded that the lender had rejected many complaints that should have been upheld – 45% of the 2,592 complaints that were lodged should have been maintained.
The customer grievances covered five different investment policies – the Bank of Scotland’s Collective Investment Plan, the Personal Investment Plan, the Guaranteed Growth Bond, the ISA Investor and the Guaranteed Investment Plan, which are now no longer sold by the bank.
Many policies were sold to older or inexperienced customers.
Tracey McDermott, the FSA’s acting director of enforcement and financial crime said: “This fine reflects the Bank of Scotland’s serious failure to treat vulnerable customers fairly. The firm’s failure to ensure it had a robust complaint handling process in place led to a significant number of complaints being rejected when they should have been upheld”.
Ray Milne, risk director at Bank of Scotland, said: “We apologise to [customers] for this. We are committed to putting this right. I would like to assure customers that the issues relate to processes that are no longer used today. We are in the process of contacting affected customers and will pay compensation where it is due”.
Just over £2 million has already been paid out in compensation to a selection of customers with a further £15 million expected to be sent out once all of the case reviews have been completed.
Customers whose complaints had been rejected in the past do not have to do anything to find out if they are eligible for compensation. If their complaints are upheld they will be compensated automatically by the end of July.