NatWest and RBS fined £14.5m for mortgage failings
NatWest and RBS banks have been fined £14.5 million by regulator the Financial Conduct Authority (FCA) for failing to ensure its mortgage advice was suitable for customers.
In some cases, the regulator said "highly inappropriate" personal comments were made by salespeople that could have resulted in the mis-selling of some mortgages.
The FCA found that in over half of mortgage sales between 1 June 2011 and 31 March 2013, the suitability of the banks' advice was not clear - either from its paperwork or recordings of phone calls.
The regulator said that when the banks assessed customers' affordability, they failed to consider "the full extent of a customer's budget when making a recommendation".
They also failed to advise customers who were looking to consolidate debt as well as failing to advise what mortgage term was most appropriate for customers.
Fit for purpose
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. Both firms failed to ensure that their customers were getting the best advice for them.
In further worrying findings for consumers, only two of the 164 sales reviewed by the FCA met its standards for mortgage sales. It also uncovered "highly inappropriate" personal comments made by salespeople about the future movement of interest rates - the FCA said this could have resulted in the borrower being sold the wrong type of mortgage.
The FSA also revealed that it initially drew the firms' attention to issues in their mortgage advice process in November 2011, following a review of branch and telephone sales. But the firms failed to take any action until the end of September 2012, exposing more customers the potential mis-selling.
"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," said McDermott. "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."
However, the firms agreed to settle the claim early and in return the FCA knocked 30% off the total fine - without this discount the firms would have faced a fine of just under £21 million.
The regulator said there is no evidence that the failings have caused widespread detriment to customers, but the banks have agreed to contact 30,000 potentially affected customers to "allow them to raise any concerns they have about the advice they received".
This could result in compensation to customers if evidence of mis-selling is found.
Ross McEwan, 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 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."
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.