TSB has paid nearly £100 million in compensation to customers in debt who were unfairly treated.
The financial watchdog has since fined the bank £10.9million for these failures.
The Financial Conduct Authority (FCA) said TSB “didn’t have the right systems to ensure fair treatment” for those who needed extra support paying off their mortgage, overdraft, credit card and loan debt.
Between June 2014 and March 2020, TSB‘s poor processes put thousands of these customers on repayment plans they couldn’t afford.
A repayment plan allows people who owe money to pay it back over time.
Instead of paying everything at once, the person makes regular, smaller payments until the debt is fully paid off.
This can make it easier to manage the debt and avoid falling behind on payments.
However, 232,849 TSB customers have found plans like this unaffordable.
As a result, TSB has paid £99.9 million in redress to the affected mortgage, overdraft, credit card, and loan customers.
The FCA suggests that staff may have been encouraged to issue as many repayment plans as possible instead of properly assessing each customer’s situation and tailoring it to their needs.
Such a move breaches the FCA’s rules in its Principles for Business, which state that “a firm must pay due regard to the interests of its customers and treat them fairly.”
An independent review into TSB’s treatment of customers who had fallen into debt, ordered by the FCA in July 2020, identified the extent of the failings.
Therese Chambers, joint executive director of enforcement and market oversight, said: “If you get into difficulty, you hope for – and we expect – fair treatment so a stressful situation isn’t made worse.
“TSB’s woeful systems and controls exposed its customers to risk of harm and meant it missed opportunity after opportunity to do the right thing.
“While it did take action, it took us instigating a review before it acted effectively to address all the issues.”
TSB would have been fined £15.6million, but it agreed to resolve the issues identified by the FCA, which meant the fine was cut by 30%.
The regulator last fined TSB £48million after a huge online banking meltdown in December 2022.
While TSB has taken steps to compensate those placed on unaffordable debt repayment plans, thousands more borrowers can and should request refunds from their bank.
There are several groups which can help you with your problem debts for free.
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
Speak to one of these organisations – don’t be tempted to use a claims management firm.
They say they can write off lots of your debt in return for a large upfront fee.
But there are other options where you don’t need to pay.
If you’re in debt with your lender – whether through an overdraft, credit card, or personal loan – and are struggling to repay, you may be entitled to file an affordability complaint.
Lenders have a responsibility to check whether a borrower can afford to pay back credit before handing it out.
However, they also have a duty to assist customers who are struggling with their repayments.
Customers can end up in further debt when lenders don’t spot red flags that indicate they are in trouble.
Your bank knows a lot about you, for example it can see if your income has fallen or your expenses have gone up.
It knows if you have had direct debits rejected or if you are paying a lot to credit cards.
But, if it were to increase your credit limit or offer new lines of credit without considering these factors, you could be owed a refund.
Sara Williams, debt expert and founder of Debtcamel.co.uk, said: “Too often people telling their bank they have problems with an overdraft, credit card or loan weren’t offered a freeze of interest and charges or repayment plan.
“They’re often just offered another loan instead, without proper checks that the new loan, supposed to solve the problems, would actually be affordable.
“If this happened to you, you can make an affordability complaint to the bank – if you win, the interest should be refunded.”
Firstly, you’ll need to complain to your bank and explain that you were in financial hardship.
You do not need to know the exact dates that your credit limit was increased before complaining.
It’s worth getting a copy of your credit file to prove to your bank that you were in some form of financial difficulty or displayed some of the red flags which would indicate to lenders that you couldn’t afford your overdraft.
This could include proof that you recently missed credit card payments or that you borrowed money from a high-cost loan company.
Customers don’t need to send any statements to their bank as they already hold these.
Sara Williams said: “It’s best to send a complaint in writing.”
Debt Camel supplies a straightforward template letter you can use to help.
And remember, if your account is a joint account, make it clear that you are both complaining.
Your bank must reply within eight weeks of receiving your complaint.
They may offer you a full refund or only a refund for the last year, even if your overdraft has caused you many problems for a long time.
However, Sara said that even “very good complaints” get rejected.
If this happens and you don’t get the response you were hoping for after eight weeks – take your complaint to the Financial Ombudsman.
Ms Williams said: “This is easy – the Ombudsman has a simple online form you can use.
“But you must do this within six months of getting the decision from the bank, so don’t delay.”
In the past, most of these complaints had to go to the Ombudsman as the banks just rejected them all.
But Sara Williams says she is seeing more cases getting reasonable offers directly from banks.
She said: “Most banks will refuse to refund back further than six years, even though the Ombudsman has the discretion to go back further if you have only just found out about these complaints.
“Many people are happy with a refund of six years of charges.
“But banks do still reject very good complaints. So don’t be fobbed off.”
