William Fox Bregman
Partner, Solicitor & Head of Banking and Finance Litigation
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Date Published:15 May 2017 Last Updated:14 Apr 2021

New Lloyds Redress Scheme for Structured Products

Banking & Finance Litigation

Lloyds to pay up to £80 million in compensation to customers in new structured products mis-selling scandal.

In a recent article published by the Financial Times, it was confirmed that redress monies are to be made available by Lloyds Banking Group. Lloyds has written to around 7,000 Lloyds TSB and Scottish Widows customers to make an offer of compensation to customers who suffered losses due to a mis-seling of financial products. This followed many complaints from customers about the poor performance outcomes of complicated pre-packaged investment strategies called structured products. The mis-selling scandal is reported to concern these structured investment products sold as “low risk” by Lloyds from 2008 to 2010 which included the ‘Acorn Market Linked Deposit’ and ‘Protected Capital Solution Funds’. The FCA said that one of the products “was in breach of the principle of providing fair, clear and not misleading promotions, because it provides the consumer with a misleading impression of the likely return”.

It is alleged in the Financial Times article that banks would often sell the structured products to customers guaranteeing that the capital they invested was safe but this redress scheme comes after the Financial Conduct Authority (FCA) reviewed structured product sales at Lloyds during the financial crisis and found that most of the time the products did not deliver what customers had been promised when they invested in the structured product.

Lloyds Trade Union has estimated that the redress could amount to more than £80 million. In the redress letters to customers, Lloyds has said: “We have identified that we did not give you sufficient information to make an informed decision before you made your deposit.” Lloyds have been criticised because the marketing of their structured products was based on very optimistic outcomes which misled customers. The FCA added: “We believe a typical customer expected the product to provide a return of up to 42 per cent if the market rose. We have had a customer complain that the market did rise during this period, but they received a return of 0 per cent, contrary to their understanding from the marketing literature.”

Deficiencies in regulatory standards when selling structured products have been found at a number of different banks. The FCA said in 2015 that there were weaknesses in how the products were both designed and sold to customers. Several banks and building societies have been fined over the issue but Lloyds may suffer worst as it was selling complex structured products after the government had bailed it out with around £20 billion of taxpayers’ money in 2008. The Financial Times article also highlights the fact that Lloyds had to set aside £450 million last year due to PPI mis-selling and the HBOS scandal. Then earlier this year Lloyds were left with no option but to set aside a further £350 million for PPI claims after the FCA announced it was extending its deadline for making new complaints.

How Ellis Jones Can Help You:

Our specialist Banking and Finance Litigation team has successfully recovered over £45m in total compensation in respect of mis-sold financial products for our clients since 2012. If you have been contacted by Lloyds, offering you compensation in relation to structured products you may be entitled to more than you have been offered by the bank and we can deal with this for you. If you wish to discuss a potential claim or complaint then please contact William Fox Bregman (william.foxbregman@ellisjones.co.uk) Partner of the Banking and Finance Litigation Department on 01202 525333.