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RBS in Mortgage Mis-selling Scandal and Fined £14.5million

The Royal Bank of Scotland has been fined £14.5m by the Financial Conduct Authority (FCA) for serious failings in the conduct of its sales of mortgages. This is yet another potential mis-selling scandal following on the back of the previous regulatory damning findings relating to PPI and to the sale of interest rate hedging products. This will be another blow to the 80% state owned bank and another area of concern for those who received advice from the bank, this time in relation to their mortgage arrangements.

Concerns about mortgage mis-selling were considered by the financial regulator of RBS the FCA and in 2011 it raised concerns with RBS about the sale of mortgages. However, for reasons not yet fully known it was only a full year later that RBS took action to address these concerns and throughout this period customers were mis-sold mortgages.

In 2012 the FCA took further steps and after the FCA reviewed 164 mortgage sales made by RBS it found that only 2 of the sales met the required standard. In light of these findings the FCA determined to fine RBS. Initially the fine imposed by the FCA was £20.7 million but RBS received a 30% discount for early settlement.

In half the cases examined RBS had not assessed whether the mortgages were suitable.

The chief executive Ross McEwan has stated that the failings were “unacceptable” and that RBS was seeking to “put things right” though it remains to be seen how this shall translate to action for those mis-sold.

Some common failings in the mis-sale of the mortgages included:

  • failing to consider the full extent of a customer's budget when making a recommendation,
  • failing to provide proper debt consolidation advice, and
  • failing to advise on what mortgage term was appropriate.

RBS has agreed with the FCA that it will contact about 30,000 customers who received advice relating to mortgages between 1 June 2011 and 31 March 2013 and RBS has promised that those who have lost out financially as a result of its mis-selling shall be compensated.

Affected customers shall be contacted by letter shortly.

It may be that if proper redress is not offered then appropriate action can be take through the courts.

David Wright is a Solicitor in the London Group Litigation & Commercial Services Department.

Slater and Gordon are leading lawyers in the field of financial services mis-selling. Call us 24/7 on freephone 0800 916 9015 or contact us online and we’ll be happy to help.

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