The Financial Services Authority or FSA, a U.K. Regulator of all providers of financial services announced Tuesday it has fined Royal Bank of Scotland (RBS.LN) and National Westminster Bank or NatWest GBP2.8 million for multiple failings in the way they handled customers' complaints, responding inadequately to more than half the complaints reviewed by the FSA.

MAIN FACTS:

-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.

-The failings in the complaints handling processes of RBS and NatWest were uncovered during the FSA's review of complaints handling in the U.K.'s major retail banks.

-As a result of the thematic review, five banks have undertaken significant action to improve their complaint handling.

-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 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 GBP4 million on the firms.

-By Zechariah Hemans, Dow Jones Newswires; 44-20-7842-9411; zechariah.hemans@dowjones.com
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