'Britain's most helpful bank' is fined £2.8m over complaints

The state-owned Royal Bank of Scotland was yesterday hit with a £2.8m fine for "multiple failings" in its customer complaints handling.

The Financial Services Authority's investigation into RBS and its NatWest subsidiary – currently advertising itself as "Britain's most helpful bank" – unearthed a decidedly unhelpful picture of the company's operations with more than half of the complaint files it reviewed showing "deficient handling". In total 62 per cent also showed a failure to comply with FSA requirements on timeliness and disclosure of customers' rights of referral to the FSA Ombudsman, and nearly a third "failed to demonstrate fair outcomes for consumers".

The watchdog harshly criticised what it said were delays in responding to customers and poor quality investigations into complaints – with handlers failing to obtain and consider all the appropriate information when making their decisions. It lambasted the poor training received by the handlers and said too many lacked proper "product knowledge" for the complaints they were dealing with.

The FSA further said correspondence from the bank did not fully address concerns raised by customers and failed to explain why complaints had either been upheld or rejected.

The fine could not have come at a worse time for RBS, which is preparing for a fresh storm of controversy over chief executive Stephen Hester's remuneration package. Including the long-term incentive plan – paid in later years for his work in 2010 – Mr Hester could be paid a maximum of £9m for just 12 months' work. Thousands of jobs have been axed since he was called in by the Government to turn around a business that had nearly collapsed during the financial crisis.

Royal Bank of Scotland is now 83 per cent owned by the tax payer, after the injection of £45bn of direct aid. Tax payers have also made available a further £8bn should the economy significantly deteriorate and have provided insurance for £280bn of potentially toxic assets on RBS's books.

Margaret Cole, the FSA's managing director of enforcement and financial crime, said of the company: "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 watchdog said the fine would have been £4m had RBS not agreed to settle early. As a result of its "thematic review", five banks have undertaken what the FSA described as "significant action" to improve their complaint handling.

Brian Hartzer, chief executive, UK Retail, Wealth and Ulster Bank at RBS, said: "We acknowledge the findings of the FSA investigation. It confirmed shortcomings in our routine complaint handling that we assessed in our own internal review and which we are committed to putting right.

"We recognise the importance of complaint handling for our customers and are focussed on addressing the root causes of complaints. Such is our determination to get this right for our customers that complaint resolution features as one of our customer charter commitments." The company insisted that the complaints covered were "non complex".