Lloyds Banking Group is set to pay millions of pounds in compensation to thousands of customers who were mis-sold investment products as “low risk” that turned out to be highly complex, The Times reports today.
The lender is writing to more than 7,000 customers of the bank and Scottish Widows, its investment arm, offering money to those who bought structured investments, which have been the subject of growing anger among consumer groups because the products were said to be too complex and performed poorly.
The group may have to pay about £80 million over the sale of the products, which included the Acorn Market Linked Deposit and Protected Capital Solution Funds. The Financial Conduct Authority said the Acorn product “was in breach of providing fair, clear and not misleading promotions, because it provides the consumer with a misleading impression of the likely return,” in a letter cited yesterday by Lloyds’ union.
It 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.”
The Acorn product was sold between 2008 and 2010, at the height of the financial crisis and as Lloyds struggled to put itself on a path to recovery.
Structured products usually offer customers some capital protection along with a return based on the performance of a market or index. They have been criticised because their marketing literature has often been based on overly optimistic assumptions.
Dominic Lindley, a consumer campaigner, said: “Cautious savers in search of a decent return were lured by high street banks into investing money in poor value and complicated structured products. We need full transparency about the scope of the Lloyds redress exercise and how it is calculating compensation.”
Lloyds has reviewed 22,000 customers who bought the products and will offer redress to 7,250.
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