View more on these topics

FCA fines RBS £14.5m over poor mortgage advice

The FCA has fined Royal Bank of Scotland and NatWest £14,474,600 over serious failings in the way the banks provided mortgage advice.

In two sales reviews from 2012, the regulator says in over half the cases the suitability of the advice was not clear from the file or call recording.

Only two of the 164 sales reviewed were considered to meet the standard required.

The FCA says affordability assessments carried out by RBS and NatWest advisers failed to consider the full extent of a customer’s budget when making a recommendation. Bank staff also failed to advise customers properly who were looking to consolidate debt and did not advise customers what mortgage term was appropriate for them.

The regulator says although there is no evidence of widespread consumer detriment, RBS and NatWest are to contact around 30,000 customers who received mortgage advice to allow them to raise any concerns about the recommendations they received.

In mystery shopping exercises carried out by the lenders themselves, there were examples of advisers giving personal views on the future movement of interest rates.

The FCA says this was “highly inappropriate and may have resulted in the borrower being sold the wrong type of mortgage for them.”

The issues were first brought to light by the FSA in November 2011 following a review of branch and telephone sales.

Despite this, RBS and NatWest did not remedy the issues raised until September 2012.

FCA director of enforcement and financial crime Tracey McDermott says: “Poor advice could cost someone their home so it’s vital the advice process is fit for purpose.  Both firms failed to ensure 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.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. 2 week ago Nat West stopped accepting mortgage cases from the Financial Network without any notice or discussion with the network. Perhaps it’s now time for appointed reps from all networks to stop dealing with Nat West.

    You reap what you sow!!

  2. If you view their intermediary system, it’s totally antiquated & as much use to us as a chocolate firegauard. If that’s mirrored across their in-house systems, no wonder advice standards go unchecked!

  3. The Cynical Broker 27th August 2014 at 9:32 am

    Hilarious to think that when RBS recently announced they were doubling their mortgage advisers in branches, a contributor on here (Jay Sharma) claimed that their in-house advisers were the best in the industry and that all brokers were basically crooks ! I wonder his defence of this latest debacle will be ??

  4. We're all doomed!!!!! 27th August 2014 at 10:35 am

    Whilst I am not going to defend these branch based advisors, I am sure that there are plenty of Mortgage Advisers who have done similar things.

    One of the things picked up was “advisers personal views on the future movement of interest rates” – Now then!! – I think this was true of most mortgage advisers – Bank based or not.

    On the subject of debt consolidation – how many Mortgage Advisers have documented this off clearly? – i.e. showing how much additional interest would be payable by significantly lengthening the term of debt pay back, in a way that the client could understand?

    This is more a case of the FCA applying some of the themes of MMR retrospectively – all I can say is, go back over your old files, and check, check, check!!!

  5. The Cynical Broker 27th August 2014 at 12:01 pm

    So the FCA fines RBS and NatWest £14,474,600 over serious failings in the way mortgage advice was provided. They cite two sales reviews from 2012, in which over half the cases checked the suitability of the advice was not clear from the file or call recording. Just two of the 164 sales reviewed met the standard required. The FCA also said that affordability assessments failed to consider the full extent of a borrowers budget when making a recommendation. They didn’t give proper advice to borrowers looking to do debt consolidation and did’t give advice to borrowers customers what mortgage term was appropriate for them.

    The group also carried out mystery shopping on it’s advisers and found examples of advisers giving personal views on likely movement of the bank rate, which the FCA says was “highly inappropriate and may have resulted in the borrower being sold the wrong type of mortgage for them.”

    However, astonishingly the regulator says there is no evidence of widespread consumer detriment !!! Can anyone explain how this can be ?

  6. @ The Cynical Broker – Poor advice and detriment are separate issues. You could give poor advice to someone and out of pure luck they may be better off. If you consider the terms of mortgages, the result of poor advice (i.e. evidenced detriment) may not become apparent for a long time.

    For example – I could recommend someone invest in a fund that is totally out of line with their risk profile (poor advice) and they could make 25% returns a year (no detriment).

  7. James Lindon-Travers 27th August 2014 at 5:34 pm

    This fine comes as no real surprise. When the financial crisis hit the Banks were all too keen to review the broker community and strike off intermediaries for the most minor of indiscretions, yet they failed to look in their own back yard. At that time brokers were made scapegoats, even being considered one of root causes of the crisis. I am sure RBS won’t be the only lender that will fall foul of the Regulator for similar failings. With lenders struggling to get their product to market through branch/direct channels in the post MMR world due a lack of fully trained staff – isn’t funny how they seek our help once again. What goes around comes around………

  8. Totally agree with “we’re all doomed”. The most common question every adviser is asked is, “what do you think will happen?” I’ve always believed the only honest response is to explain that we cannot predict the future. If the FCA is saying that we shouldn’t express opinions then I would be comfortable with that. However how is that view reconciled with the FCA’s view that a recommendation must be made to qualify as advice? If a 3 year fixed deal is recommended rather than a variable rate won’t part of the rationale be that rates are likely to increase so isn’t that expressing an opinion?

  9. The Cynical Broker 1st September 2014 at 10:15 pm

    It’s perfectly acceptable to have an opinion on what’s likely to happen to rates and most of the large institutions have an official position. What is not acceptable, is to tailor the opinion depending on which product you are trying to sell. RBS / NatWest have like many of the high street, have a fixation with cheap 2 year rates (cheap = easy sale), so to tell a borrower that they’re ok to take a 2 year fix as the bank rate isn’t likely to go up, or that an increase in bank rate won’t affect general mortgage rates would be wrong.

    It’s another reason why most borrowers are better off going to an independent mortgage broker.

Leave a comment