Lloyds to review compensation for victims of HBOS fraud

lloyds bank

The bank, which is led by boss Antonio Horta-Osorio, is consulting with City watchdog the Financial Conduct Authority about hiring an “independent third party” – possibly a law firm or accountancy firm – to review business customers who were caught up in the scandal and “provide redress if appropriate” the Telegraph reports.

It is thought that Lloyds estimates the number of clients directly affected by the fraud amount to less than 50, but it has also invited any other businesses that believe they were hit to come forward, meaning the total number could be much higher.

It gave no estimate of the size of compensation bill it might end up paying for a fraud that has rocked the banking industry.

Political pressure has been growing on Lloyds to pay out compensation to the victims of the scam after six people, including two former HBOS employees, were last week sentenced to a total of 47 years and six months in prison.

The scandal centred on HBOS’s division in Reading which handled small businesses that were in trouble between 2003 and 2007, and the criminal activity has so far forced Lloyds to write off some £245m of fraudulent loans.

While Lloyds agreed to rescue HBOS during the financial crisis in 2008 after the scam took place, MPs on the All-Party Parliamentary Group on fair business banking have argued the bank should pay compensation because the lender had been made aware of complaints about the Reading business.

The police started an investigation in 2010.

Lloyds said today: “Customer cases will be considered afresh in light of all relevant evidence including new evidence that emerged during the trial.

“Since the investigation began in 2010, it was important that the group did not do or say anything that could subsequently prejudice the trial.

“The group deeply regrets that the criminal actions have caused such distress for a number of HBOS business customers.”

The scandal involved former HBOS banker Lynden Scourfield, who was jailed for 11 years and three months, and David Mills, who ran a consultancy called Quayside Corporate Services (QCS) and who was sentenced to 15 years.

Scourfield was bribed with sex parties, luxury holidays, expensive watches and cash to refer companies that were HBOS clients to QCS. The small businesses were then asset-stripped by the consultancy.

Scourfield was described as an “utterly corrupt bank manager” last week by Judge Martin Beddoe, who said the scam left small business owners “cheated, defeated and penniless”.

The compensation review comes after George Kerevan MP, the chairman of the parliamentary group on fair business banking, sent an open letter to Mr Horta-Osorio and Lloyds chairman Lord Blackwell earlier this week urging the bank to make pay-outs to the scam’s victims.

Mr Kerevan argued that complaints about the “criminal activity were raised with senior HBOS management at board level and as early as 2007 and were repeated to senior Lloyds management after the takeover”.

“In both instances, there was an internal failure to adequately investigate these complaints.”

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