Left high and dry by RBS’s forgotten mortgage scandal
Ms J.F. writes: In 2013, the Royal Bank of Scotland said we had to reduce our Virgin One mortgage immediately by nearly £7,000. To do this, we sold shares and borr owed money. However, we recently received a letter from RBS, enquiring about our recollections of the event. The bank asked for proof of the investment sales, but this was over six years ago and we no longer have those records, so RBS says it has closed its file.
THIS is a scandal which RBS has worked hard to keep under wraps. The scheme was originally a successful joint venture with Virgin, but RBS took control in 2003. The idea was a good one, treating customers’ mortgages as part of the same picture as their savings and current account – only charging interest on the reduced overall figure. The rules were flexible, but the bedrock condition explained: ‘You will be free to draw on your account for any purpose you choose…provided the borrowing is repaid by the time you retire.’ A handy guide showed how mortgages could be gradually reduced over years, but there were no compulsory repayments ahead of retirement.
However, in 2013, RBS wrote to One account customers, telling them they had not kept to the figures shown in its guide, and ordering them to hand over a lump sum to get back on track. This caused enormous upsets as customers were forced to raise large sums.
This was totally wrong. The bank broke its own rules. Exactly when it realised its mistake is a secret, but by the end of 2017, it had begun to write to customers, admitting: ‘We recognise we did not get it right.’ Some customers have been compensated.
So where does this leave you? According to RBS, it leaves you as the loser and the bank as the winner. Why? Because the bank took so long to contact you and admit its mistakes that you could no longer produce paperwork to prove you had lost a penny.
RBS has tried to portray its 2013 mistake as a misguided attempt to help its customers. It told me: ‘For some customers, this meant reducing their facility gradually over the term remaining to support repayment.’ But the bank admitted: ‘There may have been instances where this action could have caused distress and inconvenience, and so we have sought to understand whether it may have had an adverse impact for any of our customers. Where we have found any evidence of such an impact, we have looked to put things right.’
Why, then, did the bank wait until the end of 2019 to contact you? This was more than six years since it got things so badly wrong. Could it be that this was because six years is a commonly accepted maximum legal time limit for records to be kept? And when you could not produce those records, this let the bank off the hook.
I asked RBS why it failed to contact you earlier. It refused to say. I asked why the bank seems to be laying down a rule for its customers to keep records longer than the bank itself is legally required to keep records. Again, it refused to say. I asked RBS how many One account customers have been affected by the bank’s 2013 error. It refused to say. And I asked how many such customers have been contacted so far. RBS refused to say.
This is just one in a long list of scandals that have made the very name of the bank toxic – including being fined £3.9 billion for selling dodgy investments in the US. And, of course, RBS gave us Fred ‘The Shred’ Goodwin, the boss who steered it so close to collapse it needed a massive taxpayer bailout. The poor chap was forced to retire with just a pension of around half a million pounds a year.