RBS fined for complaint tampering

The Royal Bank of Scotland (RBS) has been fined nearly £2.2 million for tampering with customer complaint files before forwarding them to the Financial Services Authority (FSA).

The fines relate to failings at the insurance firms Direct Line and Churchill – both owned by RBS – where the FSA discovered evidence that staff had altered complaints received from customers. Although the changes to paperwork were described as “minor”, the FSA imposed the fine because the two firms had failed to act with “due skill, care and diligence”.

The files were altered in March 2010 in an effort to ensure that Direct Line and Churchill met strict complaint-handling rules set by the FSA. The regulator requested the files so it could review how they had been processed. Out of a total of 50 complaints sent to the FSA for review, 27 were altered improperly before they were submitted.

Direct Line and Churchill sent a sample of complaints to an external auditor before submitting the files the FSA had requested. They were told that 28% of these were likely to fail the regulator’s assessment.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said: “This is a serious breach. The firms’ attempt to ensure that complete files were provided to the FSA backfired. The firms failed to give clear instructions resulting in staff making inappropriate alterations with one individual even forging the signatures of colleagues. The firms’ management did not know what changes had been made or when.

“In this case, the alterations did not impact on the FSA’s ability to do our job. The significant penalty is however intended to underscore to firms that it is of critical importance that material provided to the FSA must reflect the picture as it is – not as they might like it to be.”

RBS itself is still 83% owned by the taxpayer after being bailed out in the wake of Sir Fred Goodwin’s disastrous acquisition of ABN Amro in 2007. The bank was fined £2.8 million last year for failing to deal adequately with complaints from its customers.

The FSA warned Direct Line and Churchill’s customer relations management that:

• A similar failure during the FSA’s review, which was beginning soon, could lead to enforcement action for the firm
• Staff should consider what they might do to ensure that files were in a state that would pass FSA inspection and if that required staff to review their closed complaint files, they were encouraged to do so
• If staff took immediate action and changed things now, this would be an extremely positive result
• Staff found not to be operating to the required standard would face disciplinary investigation
• Staff were reminded that the most important thing was to get the right outcome for customers.

Paul Geddes, the chief executive of RBS Insurance said: “We very much regret the findings of the FSA investigation. Although no customers were disadvantaged, we are very disappointed that we did not meet the standards we expect of ourselves and which the FSA expects of us. We acknowledge the shortcomings identified in the findings and since becoming aware of this issue have taken action to addresses [them] to ensure we avoid such breaches in the future.”

The news came as David Cameron came under increasing pressure to strip Sir Fred Goodwin of his knighthood. The prime minister said he was “sympathetic” to idea of doing so after the disgraced banker was severely criticised by the FSA.