FSA fines RBS and NatWest £2.8m

11 January 2011 10:12 am | By Natalie Holt

The FSA has fined Royal Bank of Scotland and NatWest £2.8m for responding inadequately to more than half the complaints reviewed by the FSA.

The FSA’s investigation found there was an unacceptably high risk that customers may not have been treated fairly due to a number of failings with the way the banks’ approach complaint handling, including delays in responding to customers.

The regulator also found poor quality investigations into complaints, with complaint handlers failing to obtain and consider all the appropriate information when making their decision.

It found correspondence was sent that failed to fully address all of the concerns raised by customers and failed to explain why complaints had been upheld or rejected.

Finally the FSA found that customers were not receiving their Financial Ombudsman Service referral rights within the appropriate time period.

Of the complaint files reviewed by the FSA, 53 per cent showed deficient complaint handling; 62 per cent showed a failure to comply with FSA requirements on timelines and disclosure of Ombudsman referral rights; and 31 per cent failed to demonstrate fair outcomes for consumers.   

The FSA’s investigation also found the banks did not give complaint handling staff adequate training and guidance on how to properly investigate a complaint.

Monitoring of complaint handling in branches and the management information produced was found to be ineffective; and there was a failure to ensure complaint handlers properly reviewed complaints.

FSA managing director of enforcement and financial crime Margaret Cole says: “We expect firms to treat customers fairly and that consumers can be confident that their complaints will be dealt with properly. The failure of these two high street banks to deal adequately with complaints put consumers at unacceptable risk and the fine of £2.8m reflects this. 

“The poor complaints procedure of RBS and NatWest came to light during our review of complaint handling in major banks.  The review showed that banks need to make major changes to handle consumer complaints fairly and the FSA will continue to take appropriate action to ensure these changes are put in place.”

The failings in the complaints handling processes of RBS and NatWest were uncovered during the FSA’s review of complaints handling in the UK’s major retail banks.  As a result of the thematic review, five banks have undertaken significant action to improve their complaint handling. 

The FSA published a consultation paper on September 30, 2010 on changes to complaint handling requirements, which aims to increase the quality of complaints handling across the industry and increase senior management accountability for complaints.

RBS and NatWest have agreed to make significant changes to their complaints handling arrangements. 

The FSA has required RBS and NatWest to work with an independent skilled person to undertake an extensive review of all parts of their complaint handling arrangements. The FSA is also working closely with the banks to ensure that the changes will lead to effective improvements.

In a statment RBS says: “We acknowledge the findings of the FSA investigation. It confirmed shortcomings in our routine complaint handling that we assessed in our own internal review and which we are committed to putting right.

“We recognise the importance of complaint handling for our customers and are focussed on addressing the root causes of complaints.”

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