This follows the bank’s denial 16 months ago to Mortgage Solutions that the two RBS and NatWest brands had experienced any mortgage advice service issues to April 2013.
Even though the confidential Group Internal Audit report passed to this magazine last year revealed the extent of the in-branch advice service’s problems, which were put to the bank, it continued to deny the problem.
The report confirmed it was unclear in 98% of RBS advised branch sales whether customers received compliant advice, a suitable mortgage or a fair outcome despite regulatory warnings a year before.
In response, in April last year, the bank admitted its record-keeping was a ‘disappointment’ but refused to admit mistakes had been made at an advice-level in any of the cases reviewed.
Today, RBS was hit with the fourth largest retail regulatory fine of all time and the two brands admitted both brand’s advisory failings were ‘unacceptable.’
An RBS spokesperson said: “The FCA’s notice states there is no evidence of widespread problems for our customers during this period, but some cases give rise to concern that unsuitable advice was given.”
It added: “If we find unsuitable advice was given, if there was any detriment to the customer, we will put that right.”
RBS and NatWest have agreed to contact around 30,000 consumers who received mortgage advice in the relevant period, to allow them to raise any concerns.
Early settlement of the regulatory fine allowed the bank a 30% discount on the penalty from £20.6m to £14.5m.
The bank said subsequently it had completely overhauled its process. The lender now tests how its branch advisers meet the process as well as checking whether the actual recommendation the customer received was the right one.
In a statement, Ross McEwan, previous head of retail and now 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,” he added.
Tracey McDermott, director of enforcement and financial crime at the FCA said: “Both firms failed to ensure that their customers were getting the best advice for them.
“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.”
To recap, after a mystery shop in 2011, the then Financial Services Authority flagged its concerns with RBS over the quality of its branch advice service.
In a letter dated 4 November 2011, the regulator asked the bank to carry out a Risk Mitigation Programme action to assess its branch, direct and live-observed advised mortgage sales and resolve any problems.
The confidential report passed to Mortgage Solutions dated 10 September 2012 was a progress report the bank had carried out subsequently. However, the 91 sample checks carried out between January and July 2012 revealed just two telephone advice cases passed, with the other 89 cases divided between three fail categories.
From the sample, 28 cases had one or more key failures in the sales process, including MCOB non-compliance, 56 cases failed to demonstrate product suitability or a fair customer outcome. In five cases, the recommended products were not suitable or affordable, the sale was uncompliant and the customer had not received a fair outcome.
The report that followed dated 10 September 2012 covered a broad range of suitability tests including affordability; mortgage term; debt consolidation; suitability into retirement; switching loans and additional borrowing and adequacy of record keeping.
The FCA said the length of time between mystery shop in 2011 and eventual £14.5m fine was due to the nature of the regulatory process.
“These things take time to come through the system,” it said.
