Mortgage blog: Everything you need to know about RBS/Nat West mis-selling

Posted 18 September 2014

If you took out a mortgage with Royal Bank of Scotland or NatWest between 1 June 2011 and March 2013 there is a strong chance that you may have been given incorrect advice.

A Financial Conduct Authority review of 164 cases over the 22-month period has found that the vast majority of customers were given incorrect mortgage advice. And, the FCA’s report has concluded that every one of those 30,000 customers sold a mortgage on an advised basis in that time is “at risk of not having received suitable advice”.

Here, we look at the mistakes that were made and how you might be affected by this latest mis-selling scandal.

Does it affect me?

RBS and NatWest sold 177,000 mortgages between 1 June 2011 and March 2013. If you took mortgage advice from one of these banks during that time – either in a branch or by telephone – then you are almost certain to be affected.

You are likely to receive a letter from either RBS or NatWest and this letter will invite you to raise any concerns you may have over the way the mortgage was sold.

What incorrect advice was being given?

If you took mortgage advice from RBS or NatWest during the affected period your advisor would probably have failed to check that your mortgage was affordable to you. The Guardian reports that “rather than asking detailed questions, advisers were assessing outgoings using ONS stats on average household expenditure plus information on the customer’s loan and credit card borrowing”.

Advisors were also failing to carry out sufficient affordability checks if the mortgage extended into a borrower’s retirement.

In addition, advisors were making their own predictions on interest rate movements and advising on products on this basis. For example, one advisor was recorded as saying: “If we don’t increase rates with this double-dip recession, the economy is in dire straits. Rates will rise. If you take a two-year deal then rates will be higher after this period”.

One of the symptoms of the problem was the company’s IT system. A text box available to advisors to make notes about a borrower’s financial circumstances was limited to 500 characters, meaning that important information could not be recorded.

If I am affected, will I receive compensation?

The FCA has fined the bank for its misconduct although has not insisted that it compensates customers. This is because while the advice process may not have been compliant, most borrowers were not disadvantaged by the advice.

However, the FCA did find several cases of consumer detriment, meaning that there were cases where unsuitable advice had been provided or where the customers received an unfair outcome. RBS has declined to comment on these.

The Financial Ombudsman Service has recommended that you should contact the RBS or NatWest if you are concerned about a mortgage sold to you on an advised basis during the relevant period.

Richard Lloyd, the executive chairman of consumer group Which? says: “RBS and NatWest have since overhauled their processes but any affected customers should get in contact with them directly. Many people don’t shop around when they choose a mortgage, so it’s vital that customers don’t pay the price for bad advice.”

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