Mortgage advisers at Royal Bank of Scotland and NatWest improvised fact-find questions, told customers interest rates would rise and failed to adequately assess affordability, the FCA’s final notice reveals.
Earlier today the FCA fined RBS and NatWest £14.5m for serious failings in the way the banks provided mortgage advice between June 2011 and March 2013.
It found several advisers gave customers their own predictions on the future movement of the Bank of England base rate. The FCA says such conduct is “highly inappropriate”.
In one case when a customer asked an adviser if rates would rise, the adviser responded, “Yes. Absolutely”, and suggested rates could reach 5.5 per cent.
The adviser recommended a five-year fixed rate mortgage to the customer and told them: “If we don’t increase interest rates with this double-dip recession the economy is in dire straits. Rates will rise. If you take a two-year deal then rates will be higher after this period.”
The FCA found the banks’ process for assessing affordability was inadequate.
The process considered expenditure based on Office of National Statistics data and took into account some customer data, but failed to consider the full extent of a customer’s budget.
Mystery shop exercises carried out by the banks in 2012 showed that one adviser was found by his supervisor to have made 16 separate professional standards failings.
The supervisor said: “Treating customers fairly principles have not been met during this customer meeting due to misleading information being given on a number of occasions.
“Given the seller has recorded customer confirming affordability into retirement within the suitability letter when this was not confirmed by the client, appropriate advice has not been given and inappropriate behaviour has been displayed.”
Despite these findings, the adviser was allowed to continue to sell to the public with “back to basics coaching”.
The FCA also found the banks’ fact-find process was “limited”, as it included only a basic list of questions which advisers were required to ask.
Beyond this basic list it was left to advisers to determine which questions should be asked.
The training workshop provided to prospective advisers described the process as follows: “Before you carry out a fact find you need to have a question bank stored in your head that you can draw upon at any time during your interview.”
The regulator says the process was made worse by the banks’ “cumbersome and restrictive” IT system, which prevented advisers from properly recording the fact-find.
They used a free text box which was restricted to 500 characters and which the FCA says “inevitably led to advisers struggling to evidence general suitability of advice”.
The FCA also found advisers were not giving advice on mortgage terms, and only took into account customers’ preferences.