Review of FCA Final Notice on TSB Bank plc

On the 9^th of October 2024 the FCA published its final notice against TSB Bank plc, which resulted in a £10.91 million penalty over its treatment of customers in financial difficulty. The fine serves as a crucial indicator of the pressing need for enhanced compliance when it comes to customer care within the banking industry. This review examines the implications of this ruling, focusing on the systemic shortcomings identified and TSB’s subsequent corrective actions.

The FCA identified serious breaches of its Principles for Business (Principles 3, 6 and 7), reflecting TSB’s inadequate handling of customers, especially those in vulnerable circumstances. Notable issues included:

• Flawed collections practices as TSB’s procedures often compelled customers to make payments without offering viable forbearance options, which placed undue stress on borrowers and failed to consider their financial realities.
• The bank’s workforce lacked comprehensive training in identifying vulnerable customers, which hindered their ability to conduct effective affordability assessments and provide appropriate support.
• System limitations and automation failures within TSB’s account management systems led to errors, including excessive fees being charged and mishandled accounts, underscoring the necessity for robust systems and controls. Moreover, deficient communication strategies regarding account statuses resulted in confusion and further financial strain on customers in contravention of Principle 7.

In light of these findings, TSB implemented a thorough remediation strategy aimed at rectifying the identified deficiencies. Key initiatives included:

• New policies focused on enhancing transparency and ensuring fair treatment across all customer interactions.
• The bank has developed extensive training programs designed to equip staff with the skills necessary to recognise and assist vulnerable customers effectively.
• Significant improvements to account management due to technological systems have been made to reduce manual errors and ensure accurate handling of customer accounts.

The FCA’s findings are a critical reminder for the broader financial sector about the importance of placing customer welfare at the forefront of operations, especially in light of the requirements under the Consumer Duty. This fine also emphasises the need for proactive monitoring to ensure any deficiencies or gaps are identified prior to being able to cause potential consumer harm. Moreover, ensuring compliance monitoring and regular audits are undertaken is key to ensuring any deficiencies found are remediated quickly with as least possible impact to customers.

The FCA’s final notice against TSB Bank plc represents a pivotal moment for financial institutions, highlighting the urgent need for firms to review and if required, enhance their processes and practices in compliance with the FCA’s requirements, including the Consumer Duty.

At Objectivus, we specialise in advising and assisting clients to establish robust compliance frameworks, policies and procedures to ensure fair treatment of customers and ensure good outcomes are achieved for all cohorts of customers.

If you need support or have any questions about operational resilience or other compliance related issues, feel free to contact us at info@objectivus.com.

For further guidance or to discuss how these changes affect your firm, please contact Bhavisha Patel at bp@objectivus.com or Robert Hudson at rfh@objectivus.com or call Objectivus at +44 (0)2034 573 283