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Heavy fine for RBS/Nat West for mortgage mis-selling advice

27 August 2014

"Serious failings" to ensure customers received suitable mortgage advice have resulted in a fine of nearly £14.5m being imposed on Royal Bank of Scotland and its subsidiary NatWest. 

The Financial Conduct Authority (FCA) announced today that the penalty, of £14,474,600, in relation to the banks' advised mortgage sales business was being imposed, following two reviews of sales from 2012 which found that in over half the cases the suitability of the advice was not clear from the file or call recording.

Issues with the sales process included affordability assessments failing to consider the full extent of a customer’s budget when making a recommendation, failing to advise customers who were looking to consolidate debt properly, and not advising customers what mortgage term was appropriate for them.

Only two of the 164 sales reviewed were considered to meet the standard required overall in a sales process. The firms’ own mystery shopping revealed examples of advisers giving personal views on the future movement of interest rates. "This was highly inappropriate and may have resulted in the borrower being sold the wrong type of mortgage for them", the FCA commented.

Nor were concerns adequately addressed when the FCA’s predecessor, the Financial Services Authority, raised concerns about the quality of the advice process. This resulted in customers being placed at risk for an even longer period. The firms did not begin to remedy the issues effectively until the end of September 2012, despite assurances to the FSA in July 2012 that the necessary changes were well underway.

Tracey McDermott, director of enforcement and financial crime at the FCA said: “We 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.”

At the current time there is no evidence that the failings have caused widespread detriment to customers. However, the two banks have agreed to contact around 30,000 consumers who received mortgage advice in the relevant period, to allow them to raise any concerns they have about the advice they received.

The fine was reduced by 30% because the banks agreed to settle at an early stage. Without the discount the fine would have been £20,678,000.

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