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Lloyds Banking Group is launching a review of business customers who were victims of fraud perpetrated by former HBOS employees to determine whether to pay out compensation.
The state-backed lender, which agreed to acquire HBOS in 2008, is appointing a third party consultancy to assess the complaints of small businesses affected by the fraudulent actions of two ex-HBOS employees and four financiers who were jailed last week.
Lloyds said customer cases will be “considered afresh” in light of all relevant evidence including new details that emerged during the trial. The bank said it will contact all those customers they have identified as “potentially affected by the criminal activities.”
The conclusion of the review, which is expected to take up to six months, could lead to Lloyds paying out compensation. Lloyds is currently in talks with the Financial Conduct Authority about appointing an independent consultancy.
The debacle involved former HBOS manager Lynden Scourfield, who conspired with debt consultancy Quayside Corporate Services and other financiers to load unmanageable amounts of debt and high fees on to small businesses, a court heard last week.
Although the fraud took place before Lloyds acquired HBOS in 2008, Lloyds is coming under mounting pressure from politicians for reacting slowly to customer complaints that surfaced at the time.
Scourfield, who headed a division at HBOS that dealt with small companies in financial distress, referred a number of his business clients to David Mills, who ran Quayside Corporate Services, in return for bribes — including cash and prostitutes. Mills and his associates demanded huge fees from the small businesses and took over some of the
The Lloyds review will cover all clients who were referred to Quayside —including those connected to Scourfield.
Both Scourfield and Mills were sentenced last week after a trial that the judge called one of the worst cases he had ever come across. The judge said Mills was the “devil” to whom Scourfield had “sold his soul”.
Scourfield had around 200 small business customers in his division who were struggling to repay business loans to HBOS between 2003 and 2007.
The corruption forced HBOS to write off at least £245m in loans that were not repaid. Lloyds is now set to face a wave of legal claims from small businesses who were victims of the fraud.
Four other defendants, including former HBOS manager Mark Dobson, were also convicted and sentenced to up to 10 years in jail.