RBS fined a hefty £14.5m due to ìserious failingsî in Mortgage Advice provision

The Royal Bank of Scotland has demonstrated ìserious failingsî in its provision of mortgage advice and has subsequently been slapped with a £14.5m fine by the Financial Conduct Authority (FCA).

RBS, which includes NatWest amongst its subsidiaries, were found wanting in almost every sale out of the 164 the FCA analysed, with only 2 between June 2011 and March 2013 deemed to meet the criteria befitting of an FCA approved sales procedure.

Customers were misinformed about the expenditure they would face when taking out certain policies, and were shoddily counselled with regard to the length of their policies term. Those who sought to rectify their debt difficulties with the RBS were also misled by financial advisors who seemingly flaunted their position to dupe unwitting clients.

Some advisors went as far as to speculate on future interest rate developments, a move which was deemed ìhighly inappropriateî by the city regulator. According to the watchdog, by tailoring subjective beliefs about the future of interest rates, RBSí financial advisors placed themselves in a position where they could sell faulty mortgage policies that were not in the customerís interest.

Tracey McDermott, director of enforcement and financial crime at the FCA said: ìTaking out a mortgage is one of the most important financial decisions we can make. Poor advice could cost someone their home so itís vital that the advice process is fit for purpose. “Both firms failed to ensure that their customers were getting the best advice for themî: she added.

This is not the first time RBS & NatWest have been on the regulatorís radar, as the Financial Services Authority (FSA), the predecessor of the FCA, questioned the quality of their branch and telephone sales towards the end of 2011. Yet despite assuring the FSA that meaningful reform was occurring in the summer of 2012, RBS only began taking action practically a year after the initial concerns were raised. As such customers were subjected to sub-par service for an even longer period of time, further deepening the corruption RBS were revelling in. Ms. McDermott said: ìWe made our concerns clear to the firms in November 2011 but it was almost a year later before the firms started to take proper steps to put things right. “Where we raise concerns with firms we expect them to take effective action to resolve them without delay. This simply failed to happen in this case.î Had RBS not settled in the preliminary stages of investigation, they would not have been eligible for the 30% discount they were afforded and as such would have had to fork out roughly £6m more.

RBS have undertaken a comprehensive revamp of their sales protocol, which involves the re-training of mortgage advisors and new guidelines that are to be strictly adhered to when proffering advice. Additionally at least 30, 000 customers from that time are to be contacted by RBS & NatWest, receive an apology and be allowed to suggest how their policy adversely affected them.

Ross McEwan, promoted last year to RBS and NatWest Chief Executive, said: “Taking out a mortgage is one of the biggest moments in our lives, and our customers have every right to expect the very best service when making this decision. “It is clear that in the past the bank just didnít get this right, this was unacceptable and should never have happened. “We have worked hard to put things right. When I joined the bank we completely overhauled our processes, and took all our mortgage advisers off the front line for an extensive period of time to get the training required.
“As a result we are now helping more customers than ever before to buy their new home, providing them with the very best support and advice when taking out their mortgage.î He added: “Todayís notice shows that we still have challenges to face, but we are determined to take the steps needed to earn back our customersí trust.” It is clear Mr. McEwan has got a tough job on his hands in the overhaul of RBS, as more and more skeletons seem to be emerging from its closet. The publically funded banking giant has long been associated with irresponsible behaviour, with cases such as the Libor rigging serving to sully their reputation. However, Mr. McEwan has stressed his intent to harness a labour force full of skilled and reliable employees, and will hopefully steer the RBS group onto a straighter course.

RBS still remains in a sturdy financial position, taking its place at number 6 in the list of the UKís biggest mortgage lenders, its gross lending standing at £13.9bn.

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