Has YOUR bank given you a hard sell for the wrong reasons?

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Iona Bain

Lloyds Banking Group has finally ditched bonuses for frontline staff based on how many products they sell, on the day the industry’s new consumer regulator takes office.

It follows fresh warnings from the Financial Conduct Authority’s chief Martin Wheatley that banks and building societies must overhaul their incentive schemes to avoid a repeat of the PPI mis-selling fiasco.

From April 1, Lloyds branch staff have been receiving extra pay each quarter based solely on customer feedback.

The changes affect all subsidiaries of the Lloyds Banking Group – Halifax, Bank of Scotland and Lloyds TSB.

“We have moved away from a primarily sales-driven framework to one which is focused on delivering excellent service to our customers and meeting their needs in all aspects of their experience with the group,” a spokesman said.

“This is the latest change we have made to our variable pay scheme to ensure we are meeting the needs of our customers. Before any variable payment is made, colleagues will still need to pass a vigorous set of measures that ensure everything they do generates the right outcome for customers.”

Gerry Kay, chief executive of Scottish Building Society, said: “We have never considered any type of sales-based bonus for our staff.

“The banks are now implementing similar systems to building societies, where our members and customers’ needs have always come first.”

Lloyds has the heftiest bill for PPI compensation out of any provider, having risen to £6.8 billion in the last three months of 2012.

The financial ombudsman upheld 86% of the 42,195 complaints made against Lloyds TSB from July to December last year.

On the same day the Lloyds changes came into effect, the Financial Conduct Authority replaced an old regulatory regime that failed to halt the ruthless sales practices which led to disaster for banks.

“PPI is a £534m-a-month lesson in taking consumers seriously,” Mr Wheatley told a select audience in London last week.

“Public expectations of how our financial services behave are at their lowest ebb.

“We have to move away from a relationship where, frankly, customers are merely treated as a short-term profit centre.”

At the heart of this system were bonus schemes which pushed staff to prioritise the sale of products, something the Financial Services Authority finally tried to address in its last two years as the UK’s banking regulator.

“In many cases, the rewards structure at our major banks was based on a ‘pile it high, sell it cheap’ model,” said Mr Wheatley. A review into such sales incentives has received an overwhelmingly positive response from the main culprits of mis-selling, he added.

Royal Bank of Scotland and its subsidiary Natwest, Barclays, the Co-operative Bank and HSBC, which also owns M&S Bank and First Direct, have already scrapped sales targets for bonuses and now measure staff performance by consumer satisfaction.

Mr Wheatley said: “I have been encouraged by a number of firms that have already overhauled their reward structures, but I want to see others following suit.

“Real cultural change will only happen if attitudes shift throughout an organisation from the CEO to the frontline sales personnel.”

Just six months ago, Affinity, the union that represents staff at Lloyds, accused line managers of bombarding employees with texts at antisocial hours and summoning them to meetings up to 40 miles away from their branches and homes, all so they could be pressurised into meeting sales targets.

Being threatened with dismissal and even locking the bank’s front door until staff secured enough customer appointments were other “bullying” tactics used, according to staff members in the explosive testimony.

Lloyds insisted it does not tolerate workplace bullying of any kind and urged those who have suffered harassment to speak to managers or HR departments within the organisation.

Santander said its current system, which has been in place for 18 months, weighs up sales against customer satisfaction when considering extra pay for staff.

A spokesman explained that if, for example, a staff member had only sold five current accounts but each of those resulted in satisfied customers who then opened ISAs or mortgages, they would be in line for a bonus, unlike someone who sells 50 current accounts but receives multiple complaints.

A spokesman for Clydesdale Bank said: “We’ve enhanced and strengthened the focus of our incentive schemes to help ensure staff actions and behaviours are firmly centred on achieving a good outcome for our customers.

“Within the schemes there are also new measures based on monitoring and gathering customer feedback.”

This article was originally published in the Herald in April 2013.

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