RBS fined £14.5m over mortgage advice by FCA

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RBS signImage source, Getty Images

Royal Bank of Scotland has been fined £14.5m by the Financial Conduct Authority (FCA) for "serious failings" in its mortgage sales business.

The City watchdog said RBS did not ensure that it gave suitable mortgage advice to customers.

A review of 164 sales found that only two met the standards required, the watchdog said.

RBS chief executive Ross McEwan said the failings were "unacceptable and should never have happened".

The penalty is the latest in a string of financial hits taken by the bank, which is 80%-owned by the UK taxpayer.

RBS and its NatWest business have agreed to contact around 30,000 consumers who received mortgage advice between 1 June 2011 and 31 March 2013, the FCA said.

RBS avoided paying a £20.7m fine by settling the FCA fine early and qualifying for a 30% discount.

Media caption,
Lloyd Cochrane, head of mortgages at RBS: "This will not happen again"


The FCA said two reviews of sales from 2012 had found that "in over half the cases the suitability of the advice was not clear." In 2012, RBS was the UK's sixth largest mortgage lender.

The watchdog said that RBS and NatWest had failed to consider the full extent of a customer's budget when making a recommendation.

The banks also failed to give proper debt consolidation advice, and had not advised customers what mortgage term was appropriate for them, the regulator said.

Tracey McDermott, director of enforcement and financial crime at the FCA, said: "Poor [mortgage] 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."

The regulator first drew RBS's attention to mortgage advice issues in 2011 after a review of branch and telephone sales.

"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 Ms McDermott said.

"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."

Kevin Peachey, personal finance reporter

How many people have been affected?

RBS and NatWest are contacting 30,000 customers who received advice between 1 June 2011 and 31 March 2013. However, the banks estimate that only 4% of those - or 1,200 customers - may have lost out financially.

What happens next?

Customers who might have been affected will receive letters, or they can call the bank on 0800 678 1924. Anyone who lost out financially will be compensated, the banks say.

Could this happen again?

RBS said that it had completely overhauled its processes and had given staff extra training. All lenders must now also follow stricter affordability checks on mortgage applicants - outlined by the FCA - which include details of the income and outgoings.

RBS chief executive Ross McEwan 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."

Mr McEwan said the bank had "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," he added.

The fine is the latest in a series of setbacks for the bank.

RBS has already been fined £390m for its part in the Libor rate fixing scandal, and has allocated £3.2bn compensation for mis-sold insurance.

RBS reported a £8.2bn loss for last year.

The FCA has fined a number of banks and financial institutions this year, including a £12.4m penalty handed to Santander in March for failures in investment advice.

The watchdog fined Lloyds and Bank of Scotland £105m in July for "serious misconduct" in relation to rate manipulation.