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RBS subsidiary fined £2m by PIA

RBS subsidiary fined £2m by PIA

Royal Bank of Scotland subsidiary Royal Scottish Assurance has been fined £2m by the Personal Investment Authority and also faces paying £50m compensation to 30,000 clients for serious deficiencies in its flexible mortgage plans.

The deficiencies were between 1990 and 1994 and the fine is the largest the PIA has ever imposed.

The Edinburgh-based company was told it had made fundamental pricing errors when calculating premiums for the plans.

This led to customers paying less in premiums than they would need to repay the outstanding mortgage debt at the maturity of the policy.

The PIA report says RSA failed to act with due care and diligence in calculating the premiums and displayed a lack of high standards, integrity and fair dealing.

RSA chairman Benny Higgins says ” I regard the failings identified in the report as wholly unacceptable and I apologise unreservedly to policy holders affected for those failings.”

However he pointed accusingly at Scottish Equitable for providing the mortgage plan when the two insurers embarked upon a joint venture in 1990, before Scottish Equitable decided to quit the venture in 1997.

Higgins says RSA will now launch a court action against Scottish Equitable declaring “Whilst we fully accept that as the regulated entity RSA is accountable to both customers and the regulator, we will raise an action for damages against Scottish Equitable who provided us with the product.”

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