Complaints against UK banks dip 7 percent as insurance scandal fades

LONDON (Reuters) - Complaints against Britain's banks fell in the second half of last year as fewer people lodged objections about insurance protection mis-selling.

Britain's Financial Conduct Authority (FCA) said on Monday there were 2.2 million complaints against financial firms between July and December 2014, down 7 percent from the first half of the year and down 12 percent from the second half of 2013.

The FCA said Barclays was the most complained about firm, with 276,626 complaints in the second half of the year.

Lloyds Banking Group would have been the most complained about if its Lloyds Bank and Bank of Scotland brands were added together, with a combined 474,651 complaints.

Royal Bank of Scotland's NatWest and RBS brands had a combined 200,962 complaints.

Those banks all saw a drop in complaints, but there was a rise at HSBC to 152,148.

Payment protection insurance (PPI) made up about half of all grievances, and excluding a drop seen in those numbers, complaints rose by 1 percent from the first half of the year.

That was due to an 8 percent rise in the number of complaints relating to banking and credit cards, the FCA said.

Banks paid out 2.4 billion pounds in compensation to customers in the last six months of the year, up from 2.34 billion in the previous six month, with 88 percent related to PPI and other insurance and protection products.

PPI mis-selling has become the costliest consumer finance scandal ever in Britain, and banks have set aside 24 billion pounds to compensate customers for it.

PPI policies were meant to protect borrowers in the event of sickness or unemployment but were often sold to those who would have been ineligible to claim.

(For details of the complaints data click here: http://www.fca.org.uk/consumers/complaints-and-compensation/complaints-data)

(Reporting by Steve Slater; Editing by Mark Potter)