RBS and Natwest 15 Million Mortgage Advice Fine

RBS and Natwest 15 Million Mortgage Advice Fine.

Royal Bank of Scotland and subsidiary bank Natwest have collectively been fined £14.5m by the financial industry regulator, the Financial Conduct Authority (FCA).

The fine has been levied for poor mortgage advice to their clients.

The FCA did a focussed review of mortgage selling practices and sample reviews of 164 mortgage cases. 

Its findings were disastrous:

• Just 2 of the 164 mortgages cases met the required sales process (for key facts information, disclosure etc)
• Over 50% of all the 164 mortgage advice cases were said to not be clear as to whether there were suitable or affordable.

The actual fine is £20.6m but has been discounted to £14.5m (30% discount for early settlement).

Comment

We cannot comment on this case.  Suffice to say though that firms with the biggest distribution and largest sales forces will face more complaints or mis-selling risks than others.  For many years we have championed the requirement for only highly qualified advisers to give advice.  This has now come true with the Retail Distribution Review (RDR) where financial advice must be on an agreed adviser fee basis, commission free and only from highly qualified advisers.

That said there is even less protection now for the consumer.  Most large companies have closed their financial advice arms but can now still sell mortgages, investments and other products, without the need for advice, on a "direct" basis, but they can still be paid full 100% commission because it is not 'advice'. 

RBS along with many other banking groups have suffered huge fines running into billions of pounds over the last few years.  It is a if the FCA users these as a "cash cow" to levy fines and let the banks profit rather than stamping out por practice.  We wonder just how much £14.5m is a an expense to a bank with £billions on turnover?  A drop in the ocean we fear.