27th Aug 2014 07:41
LONDON (Alliance News) - Royal Bank of Scotland PLC and National Westminster Bank PLC, both members of Royal Bank of Scotland Group PLC, were Wednesday fined GBP14.5 million by the UK financial regulator for "serious failings" in their advised mortgage sales business.
The Financial Conduct Authority said it would have imposed a GBP20.7 million fine on the firms, but they qualified for a 30% discount as they agreed to settle at an early stage of the investigation.
Royal Bank of Scotland Group shares were Wednesday quoted up 0.05% at 365.90 pence shortly after the open.
In a statement, the FCA said the firms failed to ensure that advice given to customers was suitable, citing 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.
"Taking out a mortgage is one of the most important financial decisions we can make. Poor advice could cost someone their home so it?s vital that the advice process is fit for purpose. Both firms failed to ensure that their customers were getting the best advice for them," Tracey McDermott, director of enforcement and financial crime at the FCA, said said in a statement.
The FCA said the firms "did not adequately address the failings" when concerns were raised about the quality of the advice process by the FCA?s predecessor, the Financial Services Authority, resulting in customers being placed at risk for an even longer period.
"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," McDermott said.
The FSA initially drew the firms? attention to issues in their mortgage advice process in November 2011 following a review of branch and telephone sales. The regulator said that The Royal Bank of Scotland and Natwest did not begin to remedy the issues raised by the review effectively until the end of September 2012 despite the fact that the firms made assurances to the FSA in July 2012 that the necessary changes were well underway to address the FSA?s concerns.
According to the FCA, the 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 2 of the 164 sales reviewed were considered to meet the standard required overall in a sales process, according to the FCA.
The FCA said the firms' own mystery shopping showed there were examples of advisers giving personal views on the future movement of interest rates, something regulator called "highly inappropriate" that may have resulted in the borrower being sold the wrong type of mortgage.
"At the current time there is no evidence that the failings have caused widespread detriment to customers. However, the firms 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 FCA said.
The news will come as a blow to Royal Bank of Scotland Group Chief Executive Ross McEwan, who has been working to restore the banking group's reputation and finances since taking up the role last October.
"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 didn?t get this right, this was unacceptable and should never have happened," McEwan said in a statement.
"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," McEwan added.
By Samuel Agini; [email protected]; @samuelagini
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