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LONDON (Reuters) - Letters sent by Lloyds Banking Group (L:LLOY) to debtors that appeared to come from independent lawyers were "calculated to mislead", the chairman of the parliament's Treasury Select Committee said on Wednesday.
In a letter to the committee's chairman Andrew Tyrie, Lloyds Chief Executive Antonio Horta-Osorio acknowledged the bank had issued debt collection letters under the name Sechiari Clark & Mitchell, or SCM Solicitors, since the late 1980s. He said a decision had been made this year to stop the practice.
The letters were actually sent to customers by the bank's in-house litigation department.
Tyrie said evidence from Lloyds, which included an example of one of the letters, was very concerning.
"The sample letter seemed calculated to mislead. Lloyds failed to convince us that this was not the case, or to provide any satisfactory explanation as to why it issued letters in this form, but at least this practice has been brought to an end," Tyrie said.
The sample 'SCM' letter submitted by Lloyds began by saying "We are solicitors for Lloyds Bank and act for them".
"I agree that could be misleading, that particular clause," Tim Hinton, managing director of Lloyds' small-and-medium-enterprises banking division told the committee on Wednesday.
Committee member Pat McFadden replied: "I think if I asked 100 people what that meant 99 out of 100 would say that was (from) somebody outside of the bank".
Lloyds' actions came to light after payday lender Wonga was ordered by Britain's financial regulator to pay 2.6 million pounds in compensation to customers after sending them bogus letters from non-existent law firms.
The Treasury Select Committee, which oversees the work of Britain's finance ministry, was taking evidence as part of an inquiry into small business lending.
(Reporting by Matt Scuffham, editing by David Evans)