Lloyds Banking Group is preparing to compensate more than 7,000 customers who were mis-sold supposedly low-risk structured products, according to The Times.
The bank's trade union told the paper Lloyds is writing to 7,250 customers of the bank and investment arm Scottish Widows, who were mis-sold structured products.
These included the Acorn Market Linked Deposit Fund, marketed between 2008 and 2010 in the wake of the financial crisis, and Scottish Widows' Protected Capital Solutions Fund.
In its letters, Lloyds says: "We have identified that we did not give you sufficient information to make an informed decision before you made your deposit."
The Lloyds union estimates the compensation package for the Acorn fund at £66m, while Scottish Widows is expected to pay £18m to customers who were mis-sold the Protected Capital Solutions Fund. However, these sums are disputed by the bank.
It is understood Lloyds has reviewed the cases of 22,000 customers and is offering compensation to 7,250.
Lloyds' union claims the FCA started a review of Lloyds' structured products after client concern about their poor returns.
It has a copy of a letter in which the regulator says the Acorn product "was in breach of the principle of providing fair, clear and not misleading promotions, because it provides the consumer with a misleading impression of the likely return."
It adds: "We believe a typical customer expected the product to provide a return of 42% if the market rose. We had a customer complain that the market did rise during this period, but they received a return of 0%, contrary to their understanding from the marketing literature."
A spokesman for Lloyds Banking Group told The Times: "We recognise that with some of our historic structured investment products we did not provide a small number of our customers with sufficient information before making their deposits. We apologise. We are writing to these customers to explain their options and will ensure they do not suffer any financial loss."
The structured products sector has been subject to intense regulatory scrutiny since the financial crisis.
As part of a far-reaching thematic review of the vehicles in 2015, the FCA said providers must do more to ensure their products are understood by consumers, who tend to significantly overestimate the returns on offer.
Lloyds has also been caught up in the bank PPI mis-selling scandal, which has so far cost the group £17.4bn, according to The Times.
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