The Financial Conduct Authority (FCA) last week fined has the Royal Bank of Scotland and NatWest £14,474,600 as a result of serious failings in both firms' mortgage advice sales departments.
The FCA stated that the firms had failed to make sure that the advice given to customers was suitable for their individual circumstances. The issues highlighted by the FCA included failed affordability assessments, not taking account of the customers budget in making a recommendation, not properly advising a customer which mortgage term would be best for them and also failing to properly advise customers who were looking to consolidate debt.
The inadequacies were revealed by two reviews of sales in 2012 which displayed that in more than half of cases the advice suitability was unclear from the file or call recording, also only two of the 164 sales reviewed would have been deemed to meet the standard required overall in the sales process.
The predecessor of the FCA (the FSA) raised concern about the failings to the firms however these were not adequately addressed meaning that customers were places at risk for an even longer period. Director of Enforcement and Financial Crime at the FCA, Tracey McDermott, said:
“Taking out a mortgage is one of the most important financial decisions we can make. Poor advice could cost someone their home so it’s vital that the advice process is fit for purpose. Both firms failed to ensure that 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. “
The firms have agreed to contact around 30,000 customers who could potentially have been affected by the failings. These customers received mortgage advice during the period of concern and are being given an opportunity to express any issues they have with their mortgage advice. The firms also agreed to settle early on in the proceedings and were thus afforded a 30 percent stage one discount.
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This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.
