The fine was for multiple failings in the way they handled customers’ complaints, responding inadequately to more than half the complaints reviewed by the FSA.
The FSA’s investigation found that there was an unacceptably high risk that customers may not have been treated fairly due to a number of failings within the banks’ approach to routine complaint handling, including:
 delays in responding to customers;
 poor quality investigations into complaints, with complaint handlers failing to obtain and consider all the appropriate information when making their decision;
 issuing correspondence that failed to fully address all of the concerns raised by customers and failed to explain why complaints had been upheld or rejected; and
 customers not receiving their Financial Ombudsman Service (Ombudsman) referral rights within the appropriate time period.
Of the complaint files reviewed by the FSA, 53% showed deficient complaint handling; 62% showed a failure to comply with FSA requirements on timeliness and disclosure of Ombudsman referral rights; and 31% failed to demonstrate fair outcomes for consumers.
The FSA’s investigation also found that:
 the banks did not give complaint handling staff adequate training and guidance on how to properly investigate a complaint;
 the monitoring of complaint handling in branches and the management information produced was ineffective in assessing whether customers were being treated fairly; and
 the banks failed to ensure that complaint handlers properly reviewed complaints taking account of all relevant factors.
Margaret Cole, the FSA’s managing director of enforcement and financial crime said: “We expect firms to treat customers fairly and that consumers can be confident that their complaints will be dealt with properly. The failure of these two high street banks to deal adequately with complaints put consumers at unacceptable risk and the fine of £2.8m reflects this.
“The poor complaints procedure of RBS and NatWest came to light during our review of complaint handling in major banks. The review showed that banks need to make major changes to handle consumer complaints fairly and the FSA will continue to take appropriate action to ensure these changes are put in place.”
The failings in the complaints handling processes of RBS and NatWest were uncovered during the FSA’s review of complaints handling in the UK’s major retail banks. As a result of the thematic review, five banks have undertaken significant action to improve their complaint handling.
The FSA subsequently published a consultation paper on 30 September 2010 on changes to complaint handling requirements, which aims to increase the quality of complaints handling across the industry and increase senior management accountability for complaints.
RBS and NatWest have co-operated fully with the investigation, accepting the findings at an early stage and have agreed to make significant changes to their complaints handling arrangements. The FSA has required RBS and NatWest to work with an independent skilled person to undertake an extensive review of all parts of their complaint handling arrangements. The FSA is also working closely with the banks to ensure that the changes will lead to effective improvements.
The firms agreed to settle at an early stage in the investigation and therefore qualify for a 30% reduction in penalty. Were it not for this discount the FSA would have sought to impose a financial penalty of £4m on the firms.
