ONE of Scotland’s leading banks has been fined a record £20.7 million after “serious failings” meant tens of thousands of PPIcomplaints might have been rejected unfairly.

City regulator the Financial Conduct Authority (FCA) foundthat staff at Glasgow-based Clydesdale Bank and sister institution YorkshireBank failed to search for documents if they fell outside a seven-yeartimeframe, even if they were still readily available.

Clydesdale, which is owned by National Australia Bank (NAB),also provided false information to the Financial Ombudsman Service in responseto requests for evidence of the records held on PPI policies sold to individual customers.

The FCA said that out of 126,600 PPI complaints decided between May 2011 and July 2013, up to 42,200 might have been rejected unfairlyand up to 50,900 upheld complaints might have resulted in inadequate redress for customers.

The banks are now reviewing all PPI complaints handled priorto last August and have offered redress to any customers affected by thefailings.The fine is the largest imposed by the FCA for failings relating to payment protection insurance.Georgina Philippou, acting director of enforcement andmarket oversight at the FCA, said: “Clydesdale’s failings were unacceptable andfell well below the standard the FCA expects.

“The fact that Clydesdale misled the Financial Ombudsman byproviding false information about the information it held is particularlyserious and this is reflected in the size of the fine.”The FCA investigation found that Clydesdale’s complainthandlers would not search for any documents if they related to loans andmortgages which had been repaid more than seven years prior to the date of thecomplaint.The FCA also found that complaint handlers failed toidentify cases where the PPI policy sold was unsuitable for the customer.

And when calculating redress for credit card PPI complaints,handlers ignored statements that Clydesdale held for the period before 2000.Clydesdale’s acting chief executive Debbie Crosbie said: “In 2011 we introducedchanges to our policies and procedures that were designed to help us respond toPPI complaints.

“A number of these changes were inappropriate and havedisadvantaged some of our customers. We got this wrong and I am sorry for that.We deeply regret any instance which led to the Financial Ombudsman Servicereceiving incorrect or incomplete information from us.“These practices were not authorised or condoned by thebanks. As soon as this issue was discovered, we took immediate steps to stopit, we made the regulator aware and rapidly introduced strict new monitoringprocedures to prevent any recurrence.”

Clydesdale admitted that members of one team within thePPI-handling operation – without knowledge or authorisation of the banks – made alterations to some documents and information provided to the Ombudsman.National Australia Bank recently increased its provision tocover PPI complaints in the UK by £420m in anticipation of higher redresscosts.

It said in October that total provisions for PPI redresswere £806m, with £291m having been utilised. A statement read: "The fullcost will not be known until the review of past cases has been completed."

The Yorkshire and Clydesdale business, which has about 7,100UK staff and more than 300 branches, has long been the subject of speculationit could be sold after it racked up hefty losses for NAB through property loansturned sour.

National Australia Bank, which has owned Clydesdale since1987 and Yorkshire since 1990, said in October that it was considering a broadrange of options for the banks, including a sale through public markets.The Clydesdale and Yorkshire Banks have jointly set aside£806m to deal with PPI mis-selling.Since January 2011 a total of £18.5bn has been paid out tocustomers of all banks and credit card firms who were wrongly sold PPI.

The insurance was supposed to cover mortgage or loan repaymentsin the event of redundancy, but for many people the insurance was not necessary.Clydesdale Bank was fined £8.9m in September 2013 after miscalculating the mortgage repayments of customers.