Reading HBOS scam: 'Shortcomings' in compensation scheme

The scam at HBOS's Reading division targeted small business customers

A scheme to compensate customers caught up in a multi-million pound scam at an HBOS branch had "serious shortcomings", an independent report has found.

Sir Ross Cranston, a law professor at the London School of Economics, said owners Lloyds must re-assess customers' claims.

A former HBOS banker and five other financiers were jailed in February 2017 for offences at its Reading branch.

Lloyds apologised for the problems found. It took over HBOS in 2008.

Between 2003 and 2007, financiers at the branch defrauded several businesses, including one run by TV star Noel Edmonds. Many were forced to close down after the event.

Sir Ross praised "generous" awards paid out to customers for distress and inconvenience but said major flaws remained.

"Despite the merits of the customer review, I have concluded that it had serious shortcomings," he said.

"The most serious shortcoming concerned the bank's approach to assessing direct and consequential loss caused by the criminal misconduct."

A business run by Noel Edmonds was caught up in the scam

Lloyds said it accepted the customer review did not deliver "fair and reasonable" offers of compensation.

It said Sir Ross's recommendations would be fully implemented.

"Sir Ross has concluded that customers may not have received fair outcomes due to flaws in the review process. I am very sorry that this has happened," said Lloyds' chief executive Antonio Horta-Osorio.

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The report found that although Lloyds should re-assess claims, many customers may already have been paid all the compensation they are due in distress and inconvenience payouts.

"It may be that the reassessment process does not result in a materially different outcome for many customers," Sir Ross's report found.

"The key difference, however, will be that their claims will have been properly addressed, in an open and transparent manner."