July 30, 2018 / 4:46 PM / in 4 months

British lawmakers criticize Lloyds' fraud redress scheme as 'unfair'

LONDON (Reuters) - A group of British lawmakers on Monday wrote to the financial watchdog and the board of Lloyds Banking Group (LLOY.L) accusing the bank of “victim blaming” and “unfairness” in its redress scheme for victims of a fraud at its HBOS Reading division.

The letters, signed by lawmaker Kevin Hollinrake, who chairs the All Party Parliamentary Group for Fair Business Banking, said compensation offers the bank had made were insufficient and that it was treating victims with contempt.

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

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

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

“The customer compensation review was set up to deliver swift and fair compensation to customers,” she said, adding the bank had paid for all customers to take legal advice before entering into any 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 publication of an internal Lloyds 2013 report into the fraud has raised questions of a cover up. Meanwhile, regulatory and law enforcement agencies are still conducting probes into what happened.

Lloyds has also commissioned a retired judge to examine whether Lloyds properly investigated the incident after it brought HBOS in 2009.

“We are determined to get to the bottom of what happened in HBOS Reading,” the Lloyds spokeswoman said.

SMALL FIRMS TARGETED

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

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

He pointed to the senior managers’ regime, which aims to make executives at financial firms more accountable, and called on the watchdog to say what powers it had to rectify the problems he had outlined.

These included, he said, the bank attacking victims’ character, refusing to discuss the methodology used to calculate its offers or otherwise justify its decisions and abusing its resource power by refusing to make interim payments for legal representation.

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

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

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