FCA fines in cases with no customer detriment

FCA fines in cases with no customer detriment

How lenient will the Financial Conduct Authority (FCA) be when imposing fines where there has been no customer detriment?

David Carson, principal of Carson & Co which specialises in financial services law, regulation and compliance advice, says the regulator is punishing not necessarily for actual customer detriment but for the fact that customers were put at risk of losing out as a result of a financial institution’s failings.

Original news

RBS fined for mortgage advice failures, LNB News 27/08/2014 103

The Royal Bank of Scotland (RBS) and NatWest have been fined £14,474,600 after they failed to give customers suitable mortgage advice. The banks were fined following two reviews of sales in 2012 which found that in over half of cases the level of advice was not clear from the file or call recording. Only two of the 164 reviewed sales met the standards expected by the FCA.

What is the background to the enforcement action?

On 27 August 2014, the FCA imposed a fine of nearly £1.5m on RBS for what was described as ‘serious failings’ in its retail mortgage business. The regulator found that weaknesses in the bank’s mortgage advice process gave rise to a material risk of customers receiving unsuitable advice, both in respect of its RBS and NatWest lending brands.

The penalty is the latest of a number of fines to be imposed on RBS, which is 80% owned by the UK government. RBS avoided paying a £20.7m fine by settling the FCA’s enforcement action at an early stage and qualifying for a first stage 30% discount.

While the fine is significant even in the context of the FCA’s enhanced powers to levy punitive penalties for failings by financial institutions, RBS is also required to conduct a contact exercise in respect of 30,000 of its customers who received mortgage advice between mid-2011 and early 2013.

What were the reasons that the FCA gave for the penalty?

Fundamentally, the enforcement action and penalty were levied due to systemic failings in the bank’s

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