19th Jan 12
Direct Line and Churchill fined 2.1m by FSA
by Natasha Redman
In the dog house: Churchill and Direct Line made minor alterations to customer complaints
In the dog house: Churchill and Direct Line made minor alterations to customer complaints
Churchill and Direct Line, the insurance arm of the Royal Bank of Scotland (RBS), have been handed a fine of £2.1m by the Financial Services Authority (FSA) for breaching regulations on handling complaints by customers.
The fine could have been £1m higher if it hadn’t been for the fact that the RBS had co-operated with the City regulator’s investigation, which was launched after files sent to the FSA by the insurance business were discovered to have been improperly tampered with, in some cases with fraudulent signatures.
The complaints files were being reviewed by the FSA and, following a tip off, it was found that of the 50 files which the regulator had requested, 27 had been tampered with. While the alterations were small-scale and had no affect on customers, the regulator took the offences seriously.
The FSA’s acting director of enforcement and financial crime Tracey McDermott said the issue had been a “serious breach” of the regulations, and the firms’ effort to make sure that the FSA was provided with complete files backfired.
Ms McDermott explained that the firms did not give clear instructions, which resulted in employees making inappropriate changes, with one member of staff even forging colleagues’ signatures. She revealed that the firms’ management was unaware of the alterations which had been made or when they occurred.
She went on to say that, in this case, the changes did not impact the FSA’s ability to do its job, but that the significant penalty is intended to underscore to companies that it is vital that material handed to the FSA reflects the true picture, not what they want it to be.
RBS is preparing to sell the insurance firms, best known for Direct Line’s red telephone and the nodding dog on Churchill’s TV advertisement, next year in order to meet European Union regulations covering the taxpayer bailout of £45bn handed to the bank.
RBS Insurance’s chief executive Paul Geddes said that he regretted the incident, adding that although no customers were affected, they are very disappointed that they were unable to meet the standards they expect of themselves and which are expected by the FSA.
The problems arose when the FSA told Churchill and Direct Line that it planned to review how effectively customer complaints were being handled. The companies asked accountants to go over a sample and discovered that 28 per cent of the reviewed files did not meet the required standards. Staff were told that if this action continued they would risk enforcement.
In April 2010, 50 files were sent out to be formally reviewed by the FSA, which had received a tip that some had been tampered with. Of the 50 files, 27 had been altered before being sent to the FSA, while seven internal documents were discovered to contain forged signatures by one employee.
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