RBS Creates A £400m Customer Compensation Scheme

The British banking major, the Royal Bank of Scotland (RBS) has set up a compensation scheme valued at £400 million to reimburse certain customers for the charges they paid after the UK’s financial regulatory body, the Financial Conduct Authority (FCA) found the bank guilty of failing to treat customers fairly.

The FCA had launched an investigation into allegations of misconduct towards those businesses placed with its RBS’ now-defunct controversial business unit, the Global Restructuring Group (GRG).

The agency dismissed the more serious of the claims made but found that enough instances of inappropriate treatment of customers had occurred to determine that it was a systemic failure.

Economy and Stock

According to the FCA, the bank failed to adequately support small and medium-sized (SME) businesses, pressured them to pay off their debts, misled customers and did not treat customers fairly which included improper treatment of complaints. The regulator also found an inherent conflict of interest in the set up since the property division that valued customers’ properties ‘West Register’ was in a position to benefit by buying the properties after undervaluing them.

Several businesses have accused the GRG of adopting pressurizing tactics to make them default on their loans, allowing the bank to seize their assets. The GRG primarily worked with small businesses that were in financial distress in an effort to turn things around. Around 12,000 were forcefully transferred to the unit but only 4,000 of them will be receiving the refund of the complex fee.

In a statement Ross McEwan, the chief executive of RBS, said,

We have acknowledged for some time that mistakes were made. Some of our customers went through what was a traumatic and painful experience as a result of the crisis. I am very sorry that we did not provide the level of service and understanding we should have done.

RBS has said that it should have handled the transfer of customers to the unit better and explained clearly the charges levied for management and sales. The bank is also reviewing if it should be withholding bonuses from the staff members of the group.

Under the compensation scheme, SMEs will be receiving refunds of all fees they paid such as risk fees, assets sales fees and will also be permitted to register fresh complaints against the bank in regards to their treatment between the years of 2008 and 2013. The entire process will be overseen by a retired high court judge William Blackburne.

The FCA welcomed the news of RBS launching its compensation scheme and the new complaint process.

Chad Simmons

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