Britain's financial regulator has fined the Royal Bank of Scotland and its subsidiary Natwest £15m for serious failings in their advised mortgage sales business between 1 June 2011 and 31 March 2013.
The Financial Conduct Authority (FCA) confirmed in a statement that the groups failed to ensure that advice given to customers was suitable, following two reviews of sales from 2012. The regulator found that 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 overall in a sales process.
"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," said Tracey McDermott, director of enforcement and financial crime at the FCA.
"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."
What Were the Serious Failings?
The watchdog revealed that RBS and Natwest failed to perform the relevant affordability assessments when customers sought a mortgage, which means it neglected to properly consider the client's budget when making a recommendation.
The FCA added that the groups did not advise customers with a mortgage term that was appropriate for them.
"Taking out a mortgage is one of the biggest moments in our lives, and our customers have every right to expect the very best service when making this decision. It is clear that in the past the bank just didn't get this right, this was unacceptable and should never have happened," said Ross McEwan, CEO at RBS and NatWest.
"We have worked hard to put things right. When I joined the bank we completely overhauled our processes, and took all our mortgage advisers off the front line for an extensive period of time to get the training required. As a result we are now helping more customers than ever before to buy their new home, providing them with the very best support and advice when taking out their mortgage."
The FCA added that it initially alerted RBS and Natwest to the concerns it had over its mortgage advice business in November 2011, following a review of branch and telephone sales. The watchdog added that "the firms made assurances to the FSA in July 2012 that the necessary changes were well underway".
But the groups "did not begin to remedy the issues raised by the review effectively until the end of September 2012," noted the FCA.
However, RBS and Natwest received a 30% discount on the fines because they "agreed to settle at an early stage".
Around 30,000 consumers received mortgage advice during the period that the FCA found serious failings within the groups' units.