The City regulator has imposed a 14.5m fine on Royal Bank of Scotland and NatWest for “serious failings” in mortgage advice.
News of the penalty – first revealed by Sky News on Tuesday evening – was released by the Financial Conduct Authority (FCA) following reviews of the banks’ sales processes carried out in 2012.
Problems included affordability assessments failing to consider the full extent of a customer’s budget when making a recommendation and not advising customers what mortgage term was appropriate for them.
The FCA said only two of the 164 sales it reviewed were considered to meet the standard required – with some advisers even givingpersonal views on the future movement of interest rates, an action the regulator described as “highly inappropriate”.
It said such views may have resulted in the borrower being sold the wrong type of mortgage and the banksdid not adequately address the failings when concerns were first raised.
Tracey McDermott, director of enforcement and financial crime at the FCA said: “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.
“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.
“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.”
Ross McEwan, RBS and NatWest Chief Executive, said in response to the penalty: “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.
“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.
“Today’s notice shows that we still have challenges to face, but we are determined to take the steps needed to earn back our customers’ trust.”
Last month, Mr McEwan and Group chairman Sir Philip Hampton identified ongoing litigation risks as among the most significant threats to RBS’s continuing recovery, which saw it bring forward its half-year results announcement because the underlying figures were better than the City had been expecting.
A settlement with the FCA’s enforcement division over an IT systems failure in 2012 is expected within months, while huge fines for manipulating foreign exchange markets could hit RBS and other banks before the end of the year.