FINAL NOTICE

To:


The Co-operative Bank plc

1. ACTION

1.1. For the reasons given in this Notice, the FSA hereby imposes on The Co-operative

Bank plc (Co-op or the Firm) a financial penalty of £113,300 for breaches of Principle
6 (Customers’ interests) of the FSA’s Principles for Businesses (the Principles) and
Rules in the Dispute Resolution: Complaints Sourcebook (DISP). This relates to the
period 21 January 2011 to 9 May 2011 (the Relevant Period).

1.2. Co-op agreed to settle at an early stage of the FSA’s investigation. The Firm therefore

qualified for a 30% (Stage 1) discount under the FSA’s executive settlement
procedures. Were it not for this discount, the FSA would have imposed a financial
penalty of £161,910 on Co-op.

2. SUMMARY OF REASONS

2.1. In the Relevant Period there were serious failings in Co-op’s handling of complaints

arising from sales of Payment Protection Insurance (PPI).

2.2. In August 2010, the FSA published Policy Statement 10/12, ‘The Assessment and

Redress of Payment Protection Insurance complaints’ (PS 10/12). On 8 October 2010,
the British Bankers’ Association (BBA) and Nemo Personal Finance Limited (NPF)
began judicial review proceedings (the JR) challenging the FSA’s decision to introduce
the measures set out in PS 10/12.

2.3. On 21 January 2011, the FSA sent a letter to various trade associations (which was also

published on the FSA website at the same time) setting out its expectations for PPI
complaint handling during the course of the JR (the FSA Letter). The FSA Letter was a
reminder that, despite the legal challenge to the PPI complaint handling measures, the
FSA expected firms to progress PPI complaints received which were not affected by the
issues raised in the JR. The FSA Letter outlined at a high level the types of complaint

that the FSA considered could be progressed notwithstanding the JR, and provided
examples of these.

2.4. The JR was rejected by the High Court on 20 April 2011. On 9 May 2011, the BBA

and NPF decided not to appeal against the judgment bringing the JR proceedings to an
end.

2.5. In dealing with PPI complaints in the Relevant Period, Co-op breached Principle 6 by

failing to pay due regard to the interests of its customers and treat them fairly. Co-op’s
process for dealing with PPI complaints during the JR was inadequate and was likely to
lead to a failure to identify complaints capable of being progressed during that period.
As a result, Co-op incorrectly stayed PPI complaints that were capable of being
progressed (and in circumstances specifically identified in the FSA Letter as the type of
complaints which should be progressed during the JR).

2.6. Co-op also failed to send a final response to some complainants within the eight-week

timescale prescribed by DISP 1.6.2R.

2.7. The FSA regards these failings as serious. The reasons for this are:

(1)
the failings occurred despite the FSA issuing the FSA Letter. This should have
prompted Co-op to review its Policy and consider whether changes needed to be
made in light of the FSA Letter. In fact, Co-op reviewed its Policy and decided
no amendment was required notwithstanding the contents of the FSA Letter;

(2)
the FSA warned in the FSA Letter that action could be taken if failures were
identified in the handling of PPI complaints during the Relevant Period; and

(3)
it is likely that a significant proportion of the complaints received in the Relevant
Period were delayed without appropriate justification.

2.8. The FSA also recognises that:

(1)
Co-op’s process delayed rather than denied consumers redress;

(2)
in order to address the undue delay in the resolution of complaints, interest was
paid to consumers in a manner which Co-op considered to be in line with FSA
guidance. Accordingly, the FSA understands that no customer suffered additional
financial loss as a result;

(3)
there is no evidence that the breach indicates a widespread problem or weakness
at Co-op; and

(4)
Co-op has cooperated with the FSA in relation to this matter.

3. DEFINITIONS

3.1. The definitions below are used in this Notice:

“the FSA” means the Financial Services Authority of 25 The North Colonnade, Canary
Wharf, London, E14 5HS.

“Co-op” means The Co-operative Bank plc.

“the Firm” means The Co-operative Bank plc.

“the Principles” means the FSA’s Principles for Businesses as set out in the FSA
Handbook.

“DISP” means the Dispute Resolution: Complaints Sourcebook as set out in the FSA
Handbook.

“the Relevant Period” means the period between 21 January 2011 and 9 May 2011.

“PPI” means Payment Protection Insurance.

“PS 10/12” means Policy Statement 10/12, ‘The assessment and redress of Payment
Protection Insurance complaints; feedback on the further consultation in CP 10/6 and
final Handbook text’

“BBA” means the British Bankers’ Association.

“NPF” means Nemo Personal Finance Limited.

“the JR” means the Judicial Review proceedings challenging the FSA’s decision to
introduce the measures set out in PS 10/12.

“the FSA Letter” means the FSA’s letter from Christina Sinclair to Trade Associations
dated 21 January 2011.

“the Group” means The Co-operative Banking Group Limited.

“CP 09/23” means Consultation Paper 09/23, ‘The assessment and redress of payment
protection insurance complaints’.

“the Open Letter” means the FSA’s letter to the industry dated 29 September 2009.

“CP 10/6” means Consultation Paper 10/6, ‘The assessment and redress of payment
protection insurance complaints; feedback on CP 09/23 and further consultation’.

“the FOS” means the Financial Ombudsman Service.

“the Policy” means Co-op’s Interim Payment Protection Insurance Complaints Policy.

“ICOB” or “ICOBS” means the Insurance: Conduct of Business sourcebook as set out
in the FSA Handbook.

“DEPP” means the FSA’s Decision Procedure & Penalties Manual.

“the Act” means the Financial Services and Markets Act 2000.

4. FACTS AND MATTERS

The Firm

4.1. Co-op is an operating subsidiary of The Co-operative Banking Group Limited (the

Group). It offers a range of financial products, including current accounts, savings
accounts, credit cards and loans. The Firm has been authorised to perform regulated
activities by the FSA since 1 December 2001.

Payment Protection Insurance (PPI)

4.2. PPI is an insurance product which covers loan or debt repayments in certain

circumstances where the consumer is unable to service the debt. Typically, PPI is
offered or sold to the consumer at the same time the credit is taken out as either a single
up front premium or as a separate monthly instalment.

4.3. Historically, Co-op offered PPI for loans, credit cards and mortgages. In the Co-

operative Group Annual Report 2009, the Firm stated that:

“There has been extensive regulatory scrutiny of the payment protection insurance
(PPI) market over recent years, and, as a result of this, following a request by the FSA
to a number of institutions in the market, the Bank stopped selling its single premium
PPI product in January 2009.”

4.4. On 14 January 2005, the FSA became responsible for regulating firms selling general

insurance products. Since that time the FSA has taken a series of steps to ensure that
customers were treated fairly in the sale of PPI.

4.5. There have been extremely serious problems in relation to PPI across the financial

services industry. There were widespread weaknesses in PPI selling practices and there
have been a very high number of complaints about PPI.

4.6. In relation to the handling of PPI complaints, in 2009 the FSA developed serious

concerns about the fairness with which firms were assessing consumer complaints
about past PPI sales. These concerns were prompted by:

(1)
the increasing volume of PPI complaints being received by firms;

(2)
the large number of PPI complaints being referred to the Financial Ombudsman
Service (the FOS);

(3)
the significant difference in consumer experience and outcome between PPI
complaints to firms and those referred to the FOS;

(4)
the FSA’s discussions with the FOS concerning its dealings with some firms’
complaint handling departments concerning PPI complaints;

(5)
the FSA’s own analysis of samples of complaints decisions made by some firms;

(6)
findings from the FSA’s thematic work, mystery shopping, and enforcement
actions concerning firms’ sales practices and views on applicable sales standards;
and

(7)
the FSA’s dialogue with firms and other industry representatives about the
approach adopted in assessing PPI complaints.

4.7. The FSA, therefore, took action to ensure that PPI complaints were dealt with properly

by firms.

4.8. As part of this, on 29 September 2009, the FSA published Consultation Paper 09/23,

‘The assessment and redress of payment protection insurance complaints’ (CP 09/23).
This set out the FSA’s proposals for:

(1)
guidance on the fair assessment and (where appropriate) redress of complaints
related to sales of PPI; and

(2)
rules requiring firms to re-assess, against the proposed new guidance, complaints
about PPI sales that the firm had previously rejected.

4.9. At the same time as CP 09/23, the FSA published a letter (the Open Letter) to the

industry, detailing the common failings in PPI sales practices. This set out six common
types of failings in PPI sales:

(1)
failings in the conduct of the sale;

(2)
failings around eligibility and exclusions and limitations;

(3)
failings around suitability;

(4)
failings around price disclosure;

(5)
additional failings specific to single premium policy sales; and

(6)
additional failings specific to regular premium policies.

4.10. On 9 March 2010, the FSA entered into further consultation by publishing Consultation

Paper 10/6, ‘The assessment and redress of payment protection insurance complaints;
feedback on CP 09/23 and further consultation’ (CP 10/6). This provided an additional
six weeks for consulting on the FSA’s proposals.

4.11. On 10 August 2010, the FSA published Policy Statement 10/12, ‘The assessment and

redress of Payment Protection Insurance complaints; feedback on the further
consultation in CP 10/6 and final Handbook text’ (PS 10/12). This reported on the
responses that the FSA received to the further consultation in CP 10/6, and on the
decisions that were reached in light of them, including final Handbook text. The FSA
anticipated that the package of measures would lead firms to:

(1)
handle PPI complaints more fairly and consistently, benefiting consumers who
may have been mis-sold PPI and who complain, and reducing the heavy burden of
cases on the FOS; and

(2)
deliver fairer outcomes to consumers who may have been mis-sold PPI but who
have not complained.

4.12. At the same time as PS 10/12 was published, the FSA stated in a press release:

“This remedy is fair to consumers and the industry alike. The onus is now on the
industry to ensure it treats all customers fairly. We will be monitoring the
implementation of our guidance closely to ensure real change is delivered.”

4.13. The provisions of PS 10/12 came into force on 1 December 2010.

4.14. On 8 October 2010, the British Bankers’ Association (BBA) and Nemo Personal

Finance Limited (NPF) began Judicial Review (the JR) proceedings challenging the
FSA’s decision to introduce the new PPI complaints handling measures.

4.15. Specifically, the BBA applied to the Courts for a judicial review of:

(1)
the FSA’s approach contained in PS 10/12; and

(2)
the FOS approach to PPI sales complaints contained in its guidance.

4.16. The JR was heard in the High Court during the week commencing 24 January 2011 and

was subsequently rejected on 20 April 2011.

4.17. On 9 May 2011, the BBA and NPF announced that they had decided not to appeal

against the judgment bringing the JR proceedings to an end.

4.18. On 15 October 2010, Co-op introduced an initial draft of its ‘PPI Complaints Policy –

Interim’ (the Policy). This was an interim policy to be followed pending the conclusion
of the JR:

“Any complaints received from 8th October 2010 or currently undergoing investigation
as at 8th October 2010 will be handled in accordance with this Policy.”

4.19. A key aspect of the Policy was that it set out the circumstances in which a complaint

could be finally determined during the JR.

4.20. The Policy instructed staff to:

(1)
assess the customer’s eligibility to claim on the PPI policy at the time of the sale,
where the eligibility assessment included:

 “customers age at the point when the product was taken out…

 UK residency…

 Hours of paid employment per week…

 a permanent job (rather than casual, seasonal, occasional or temporary)”

2)
If eligibility was not an issue, the Policy stated that “In addition there are some
infrequent situations where a decision would be able to be made”. The following
non-exclusive examples were given (with no guidance as to the other situations in
which a decision may be possible):

 PPI positive choice box not ticked but PPI still on loan contrary to customer

request (e.g. processing error)

 Loan and PPI premiums continue to be taken after agreed end date or

repayment of loans (ie loan in credit due to Standing order problem or
processing error)

 CPI customer not aware that they had the product as initially provided for

free under offer

 Processing error where we have not cancelled the product following customer

request. ”

4.21. In addition to setting out the circumstances in which a complaint could be dealt with

during the JR, where a complaint was to be put on hold, the Policy also provided for a
customer’s financial hardship to be considered.

4.22. The Policy did not provide for complaints raising other common issues such as the

suitability of the product or the disclosure of policy information (as set out in the FSA
Letter – see further below).

4.23. The Policy was subsequently updated on 18 October 2010, 27 October 2010, 7

December 2010 and 21 February 2011. There were no significant amendments made to
the Policy in these revisions.

Letter to Trade Associations

4.24. Following the start of the JR, the FSA became increasingly concerned about the way in

which firms were handling PPI complaints during the legal proceedings. The FSA
became aware that some firms were placing on hold nearly all of their PPI complaints,
citing the JR as the reason for this. Whilst the FSA recognised that there would be
some complaints which would turn on the outcome of the JR and could not, therefore,
be dealt with whilst the JR was in progress, the FSA considered it essential that firms
did not adopt a strategy of putting all or the majority of complaints on hold pending the
outcome of the legal proceedings. The FSA expects consumer complaints to be
handled in a proper and timely manner. It was, therefore, crucial that firms gave due
attention to points made in any publication by the FSA. Otherwise customers, who had

been mis-sold to, would be caused further detriment if their complaints were not dealt
with fairly and appropriately.

4.25. On 21 January 2011, the FSA publicly set out its expectations for PPI complaint

handling during the course of the JR in the FSA Letter. This was addressed to Trade
Associations but also published at the same time.

4.26. The FSA Letter was to act as a reminder that, despite the legal challenge to the PPI

complaint handling measures, the FSA still expected firms to carry out a full review of
all PPI complaints received:

“Following the launch of the judicial review, a number of trade associations
approached us to discuss their interpretation of our Dispute Resolution: Complaints
sourcebook (DISP), in particular DISP 1.6.2R, and whether this rule enabled their
members to defer assessment of all PPI complaints pending the conclusion of the
judicial review process…

We have made it clear to the trade associations that have approached us that in our
view DISP 1.6.2R(2) does not permit firms to take a standard or generic approach to
PPI complaints which could, for example, have the effect that all or substantially all
complaints are not issued with a final response during the judicial review. Rather, we
expect firms to consider each PPI complaint in order to be able to conclude whether or
not its resolution is dependent on the outcome of the judicial review.”

4.27. The FSA Letter outlined at a high level the types of complaint that the FSA considered

could be progressed, and provided examples of these. The letter stated that where a
complaint could be upheld under the general law and/or ICOB/ICOBS the complaint
should be progressed notwithstanding the JR. Examples of complaints that should be
progressed were given as follows:

(1)
complaints about a sale where the customer was not provided with a policy
summary; and/or

(2)
complaints about an oral sale where the customer’s attention was not drawn to the
importance of reading the policy summary; and/or

(3)
complaints about a sale where information was communicated to the customer in
an unclear, unfair or misleading way; and/or

(4)
complaints where the firm advised on the sale of PPI policy without taking
reasonable care to ensure its suitability.

4.28. The FSA acknowledged that some complaints would concern matters which were being

challenged by the JR, but did not accept that all PPI complaints would do so.

4.29. The FSA Letter was reviewed and circulated internally by Co-op on the date of its

issue. This bulletin set out the FSA’s expectations as follows:

“The FSA has today issued a letter to remind firms of their obligations in handling PPI
claims and to address the status of PS10/12 pending the outcome of the judicial review.

The FSA expects firms to conduct an initial review of all PPI complaints in order to
determine whether its resolution is dependent on the outcome of the judicial review.
Where the complaint relates to a breach of the general law and/or ICOB or ICOBS,
and appropriate action can be taken, the firm should take action and/or grant redress.
These complaints should not be put on hold.”

4.30. The FSA Letter did not set new requirements. It was, however, a reminder to firms of

their obligations and the FSA’s expectations. This should have prompted Co-op to
review its Policy and consider whether changes needed to be made in light of the FSA
Letter. In fact, Co-op reviewed its Policy and decided no amendment was required
notwithstanding the contents of the FSA Letter.

FSA’s review of Co-op complaint files

4.31. The FSA reviewed a small sample of complaints pertaining to regulated sales of PPI

dealt with by Co-op during the Relevant Period. This found that 100% of cases
reviewed were incorrectly stayed, in circumstances identified in the FSA Letter as those
in which a complaint should be progressed during the JR.

4.32. For example, Co-op failed to progress two complaints where the customer claimed:

(1)
“When I took out the card, I was made to believe that my application would only
be successful if I also buy a PPI policy…I do not believe being put under pressure
to buy this policy as part of the credit card deal was a fair and reasonable
obligation as I did not need this insurance...I was not told that PPI will only pay
one year only of the monthly repayments if I needed to make a claim…I was not
asked if my employers would pay me sick pay…I was made to believe that
payment protection insurance was a condition of the agreement…”

(2)
“I was not told that the PPI was optional…It was implied that the acceptance of
the PPI element by me as part oif [sic] the loan was expected….My personal
situation with regards to my salary…in the event of accident/sickness/redundancy
was not discussed with me.”

4.33. Given the flawed guidance in the Policy combined with the high failure rate in the

sample, it is likely that a significant proportion of the complaints received in the
Relevant Period were delayed without appropriate justification.

4.34. The FSA reviewed a small sample of complaints about regulated sales of PPI which

were dealt with by Co-op in the course of the JR to check whether they were dealt with
within the eight-week timescale prescribed by DISP 1.6.2R. This found that Co-op
failed to respond to some complainants within this time.

4.35. During the Relevant Period, Co-op received 1,629 complaints concerning sales of PPI.

The Firm took the decision to stay 930 of these on the basis that they could not be
finally determined until the JR was concluded. This was 57.1% of the complaints
received during this time.

5. FAILINGS

5.1. The regulatory provisions relevant to this Final Notice are referred to in Annex A.

5.2. In dealing with PPI complaints in the Relevant Period, Co-op breached Principle 6 by

failing to pay due regard to the interests of its customers and treat them fairly. This was
because:

(1)
Co-op’s process for dealing with PPI complaints during the JR was inadequate
and was likely to lead to a failure to identify complaints capable of being
progressed during the JR. The Firm’s PPI complaint handling process instructed
staff to only check whether a complaint was alleging eligibility or whether it fell
within limited but non-exhaustive additional categories with no guidance
provided as to what other categories might be relevant. It did not provide for
complaints raising issues such as the suitability of the product or the disclosure of
policy information (as set out in the FSA Letter); and

(2)
Co-op incorrectly stayed PPI complaints that were capable of being progressed
(and in circumstances specifically identified in the FSA Letter as the type of
complaints which should be progressed during the JR). This resulted in an
unnecessary and unjustified delay in the resolution of a considerable number of
customer complaints.

5.3. Co-op also failed to send a final response to some complainants within the eight-week

timescale prescribed by DISP 1.6.2R.

6. SANCTION

6.1. The FSA’s policy on the imposition of financial penalties and public censures is set out

in the FSA’s Decision Procedure & Penalties Manual (DEPP) and the Enforcement
Guide. In determining the appropriate outcome in this case, the FSA has had regard to
this guidance. The FSA considers that the seriousness of this matter merits the
imposition of a financial penalty.

6.2. DEPP 6.1.2G provides that the principal purpose of a financial penalty is to promote

high standards of regulatory conduct. It seeks to do this by deterring firms who have
breached regulatory requirements from committing further contraventions, helping to
deter other firms from committing contraventions and demonstrating generally to firms
the benefit of compliant behaviour.

6.3. The FSA introduced a new policy for imposing a financial penalty in March 2010,

which requires the FSA to apply a five-step framework to determine the appropriate
level of the financial penalty. This policy is set out in Chapter 6 of DEPP. In this case,
as the Relevant Period is 21 January 2011 to 9 May 2011, the FSA has applied the new
policy to calculate the appropriate penalty for Co-op's breach.

Step 1: disgorgement

6.4. Pursuant to DEPP 6.5A.1G, at Step 1 the FSA seeks to deprive a firm of the financial

benefit derived directly from the breach where it is practicable to quantify this.

6.5. The FSA has not identified any financial benefit that Co-op derived directly from its

breach.

6.6. Step 1 is therefore £0.

Step 2: the seriousness of the breach

6.7. Pursuant to DEPP 6.5A.2G, at Step 2 the FSA determines a figure that reflects the

seriousness of the breach. Where the amount of revenue generated by a firm from a
particular product line or business area is indicative of the harm or potential harm that
its breach may cause, that figure will be based on a percentage of the firm’s revenue
from the relevant products or business area.

6.8. The FSA considers that the revenue generated by Co-op is not an appropriate indicator

of the harm or potential harm caused by its breach in this case. The FSA considers that
a figure based on a percentage of Co-op’s relevant redress is an appropriate indicator of
the harm or potential harm caused by its breach in this case. In respect of all
complaints relating to PPI that were stayed during the Relevant Period, Co-op’s
relevant redress is equal to the amount of redress (including any interest) paid out on
these complaints. The period of Co-op’s breach was from 21 January 2011 to 9 May
2011. The FSA considers Co-op’s relevant redress for this period to be £3,238,202.

6.9. In cases where revenue is indicative of the harm or potential harm that may have been

caused, in deciding on the percentage that forms the basis of the step 2 figure, the FSA
considers the seriousness of the breach and chooses a percentage between 0% and 20%.
This range is divided into five fixed levels which represent, on a sliding scale, the
seriousness of the breach; the more serious the breach, the higher the level. For
penalties imposed on firms there are the following five levels:

Level 1 – 0%

Level 2 – 5%

Level 3 – 10%

Level 5 – 20%

6.10. For the purposes of this case, the FSA has applied the same range of percentages.

6.11. In assessing the seriousness level, the FSA takes into account various factors which

reflect the impact and nature of the breach, and whether it was committed deliberately
or recklessly.

6.12. DEPP 6.5A.2(12) lists factors likely to be considered ‘level 1, 2 or 3 factors’. Of these,

the FSA considers the following factors to be relevant:

(1)
Co-op did not make any profit or avoid any loss directly as a result of the breach;

(2)
the FSA understands that there was no loss to Co-op’s consumers, individually or
in general;

(3)
there is no evidence that the breach indicates a widespread problem or weakness
at Co-op; and

(4)
the FSA has not found that the breach was committed deliberately.

6.13. DEPP 6.5A.2(6) lists non-exhaustive factors relating to the impact of the breach and

DEPP 6.5A.2(7) lists non-exhaustive factors relating to the nature of the breach. Under
the circumstances of this case, the FSA considers the following factors to be relevant to
the impact and nature of the breach:

(1)
the failings unduly delayed resolution of complaints made by consumers who may have
been mis-sold PPI products; and

(2)
the failings occurred despite the FSA issuing the FSA Letter, with Co-op failing to
amend its Policy and incorrectly staying PPI complaints specifically identified as
complaints to be progressed during the JR. The FSA warned in the FSA Letter that
action could be taken if failures were identified in the handling of PPI complaints
during the Relevant Period.

6.14. Taking all of these factors into account, the FSA considers the seriousness of the breach

to be level 2 and so the Step 2 figure is 5% of £3,238,202.

6.15. Step 2 is therefore £161,910.

Step 3: mitigating and aggravating factors

6.16. Pursuant to DEPP 6.5A.3G, at Step 3 the FSA may increase or decrease the amount of

the financial penalty arrived at after Step 2, but not including any amount to be
disgorged as set out in Step 1, to take into account factors which aggravate or mitigate
the breach.

6.17. The FSA considers that the breach was aggravated by the high degree of awareness in

the industry generally of the standards to be applied to complaints handling during the
course of the JR following the FSA Letter (which Co-op received and was therefore
aware of).

6.18. The FSA considers that the following factors mitigate the breach:

(1)
Co-op has no previous disciplinary findings recorded against it; and

(2)
Co-op has cooperated with the FSA in relation to this matter.

6.19. Having taken into account these aggravating and mitigating factors, the FSA considers

that the Step 2 figure should not be increased or decreased.

6.20. Step 3 is therefore £161,910.

Step 4: adjustment for deterrence

6.21. Pursuant to DEPP 6.5A.4G, if the FSA considers the figure arrived at after Step 3 is

insufficient to deter the firm who committed the breach, or others, from committing
further or similar breaches, then the FSA may increase the penalty.

6.22. The FSA considers that the Step 3 figure of £161,910 represents a sufficient deterrent to

Co-op and others, and so has not increased the penalty at Step 4.

6.23. Step 4 is therefore £161,910.

Step 5: settlement discount

6.24. Pursuant to DEPP 6.5A.5G, if the FSA and the firm on whom a penalty is to be

imposed agree the amount of the financial penalty and other terms, DEPP 6.7 provides
that the amount of the financial penalty which might otherwise have been payable will
be reduced to reflect the stage at which the FSA and the firm reached agreement. The
settlement discount does not apply to the disgorgement of any benefit calculated at Step
1.

6.25. The FSA and Co-op reached agreement at Stage 1 and so a 30% discount applies to the

Step 4 figure.

6.26. Step 5 is therefore £113,337, which we have rounded to £113,300.

6.27. Penalty

6.28. The FSA therefore imposes a total financial penalty of £113,300 on Co-op for

breaching Principle 6 and DISP 1.6.2R.

7. PROCEDURAL MATTERS

Decision maker

7.1. The decision which gave rise to the obligation to give this Notice was made by the

Settlement Decision Makers.

7.2. This Final Notice is given under, and in accordance with, section 390 of the Act.

Manner of and time for Payment

7.3. The financial penalty must be paid in full by Co-op to the FSA by no later than 18

January 2013, 14 days from the date of the Final Notice.

If the financial penalty is not paid

7.4. If all or any of the financial penalty is outstanding on 19 January 2013, the FSA may

recover the outstanding amount as a debt owed by Co-op and due to the FSA.

7.5. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of information

about the matter to which this notice relates. Under those provisions, the FSA must
publish such information about the matter to which this notice relates as the FSA
considers appropriate. The information may be published in such manner as the FSA
considers appropriate. However, the FSA may not publish information if such
publication would, in the opinion of the FSA, be unfair to Co-op or prejudicial to the
interests of consumers.

7.6. The FSA intends to publish such information about the matter to which this Final

Notice relates as it considers appropriate.

FSA contacts

7.7. For more information concerning this matter generally, contact Andrew Wigston (direct

line: 020 7066 286 /fax: 020 7066 287) of the Enforcement and Financial Crime
Division of the FSA.

Tom Spender

Project Sponsor
FSA Enforcement and Financial Crime Division


ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS


1. STATUTORY PROVISIONS

1.1. The FSA’s statutory objectives, set out in section 2(2) of the Act, are market confidence,

financial stability, consumer protection and the reduction of financial crime.

1.2. Section 206 of the Act provides:

“If the Authority considers that an authorised person has contravened a requirement
imposed on him by or under this Act…it may impose on him a penalty, in respect of
the contravention, of such amount as it considers appropriate”.

1.3. Co-op is an authorised person for the purposes of section 206 of the Act. The requirements

imposed on authorised persons include those set out in the FSA’s rules made under section
138 of the Act.

2. REGULATORY PROVISIONS

Principles for Businesses (PRIN)

2.1. The Principles are a general statement of the fundamental obligations of firms under the

regulatory system and are set out in the FSA Handbook. They derive their authority from the
FSA’s rule-making powers as set out in the Act and reflect the FSA’s regulatory objectives.
The Principles relevant to this case are as follows:

2.2. Principle 6 (customers’ interests) provides:

“A firm must pay due regard to the interests of its customers and treat them fairly.”

Dispute Resolution: Complaints Sourcebook (DISP)

2.3. The Dispute Resolution: Complaints Sourcebook contains rules and guidance on how firms

should deal with complaints promptly and fairly.

2.4. During the Relevant Period, DISP 1.6.2R provided that:

“The respondent must, by the end of eight weeks after its receipt of the complaint, send the
complainant:

1) a final response; or

2) a written response which:

a) explains why it is not in a position to make a final response and indicates when it

expects to be able to provide one;

b) informs the complainant that he may now refer the complaint to the Financial

Ombudsman Service; and

c) encloses a copy of the Financial Ombudsman Service standard explanatory leaflet.”