Small to medium-sized businesses (SMBs) impacted by fraudulent activity within Lloyds-owned HBOS could be in line for larger compensation payouts after an independent review found “shortcomings” in the current compensation program.
The BBC reported this week that an independent review by London School of Economics professor Sir Ross Cranston concluded that Lloyds must reassess SMBs’ claims. While Lloyds, which acquired HBOS in 2008 and subsequently discovered fraudulent activity at the unit, has paid out “generous” awards to impacted SMBs, Cranston added the process has “serious shortcomings.”
“The most serious shortcoming concerned the bank’s approach to assessing direct and consequential loss caused by the criminal misconduct,” he said.
Lloyds has said it will fully adhere to Cranston’s recommendations, according to reports.
“Sir Ross has concluded that customers may not have received fair outcomes due to flaws in the review process,” said Lloyds CEO Antonio Horta-Osorio. “I am very sorry that this has happened.”
However, despite his conclusions, Cranston also added that a reassessment of compensation tactics may “not result in a materially different outcome for many customers.”
“The key difference, however, will be that their claims will have been properly addressed, in an open and transparent manner,” he said.
The U.K. Financial Conduct Authority had previously recommended a review of the compensation scheme, according to separate reports in the Financial Times. U.K. regulators have been keeping a close eye on the HBOS fraud case, which involved a reported conspiracy among HBOS bankers in various markets working with external consultants to load SMB clients with debt.
A 2017 trial related to the case led to six people being sentenced to jail for their participation in the fraud.
In a statement following the release of Cranston’s findings, SMB advocacy group SME Alliance issued a statement criticizing the compensation process.
“It is nearly three years since the guilty verdicts were handed down, and a decade-and-a-half since many of the frauds took place,” said Nikki Turner, director of SME Alliance. “Victims are suffering real hardship, many lost their businesses, homes and — in some cases — families.”