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On Wednesday the Financial Conduct Authority (FCA) announced it had fined the banks after they failed to ensure that home loan advice given to customers was suitable.
The issues with the sales process included affordability assessments failing to consider the full extent of a customer’s budget when making a recommendation, failing to advise customers who were looking to consolidate debt properly and not advising customers what mortgage term was appropriate for them.
Only two of the 164 sales reviewed were considered to meet the standard required overall in a sales process.
In the banks’ own mystery shopping there were examples of advisers giving personal views on the future movement of interest rates.
The FCA found this to be highly inappropriate and may have resulted in the borrower being sold the wrong type of mortgage.
“Taking out a mortgage is one of the most important financial decisions we can make,” FCA director of enforcement and financial crime Tracey McDermott said.
“Poor advice could cost someone their home so it’s vital that the advice process is fit for purpose,” Ms McDermott said.
“Both firms failed to ensure that their customers were getting the best advice for them,” she said.
“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.”
Ms McDermott said the lenders failed to take immediate action to resolve the issue.
The FSA initially drew the firms’ attention to issues in their mortgage advice process in November 2011 following a review of branch and telephone sales.
The firms did not begin to remedy the issues raised by the review effectively until the end of September 2012 despite the fact that the firms made assurances to the FSA in July 2012 that the necessary changes were well underway to address the FSA’s concerns.
While there is no evidence that the failings have caused widespread detriment to customers, RBA and NatWest have agreed to contact approximately 30,000 consumers who received mortgage advice in the relevant period, to allow them to raise any concerns they have about the advice they received.
The firms agreed to settle at an early stage and therefore qualified for a 30 per cent stage one discount.
Were it not for this discount the fine would have been $36.8 million (£20,678,000).