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Churchill and Direct Line fined £2.1m by FSA over forged signatures

Customer complaint files from Royal Bank of Scotland-owned firms had been ‘improperly altered’, regulator finds

Royal Bank of Scotland’s insurance arm, Direct Line and Churchill, has been fined £2.1m by the Financial Services Authority for breaching rules on handling customer complaints.

The fine would have been £1m higher if RBS had not co-operated with the investigation by the City regulator, which was launched when files being sent by the insurance business to the FSA were found to have been “improperly altered”, some with fraudulent signatures.

The FSA had been reviewing complaints files and, after being tipped off, found that of 50 files that had been requested by the regulator, 27 had been altered. While the alterations were minor and did not affect customers, the FSA took the offences seriously.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, described the problems as a “serious breach” of the rules.

“The firms’ attempt to ensure that complete files were provided to the FSA backfired. The firms failed to give clear instructions, resulting in staff making inappropriate alterations, with one individual even forging the signatures of colleagues. The firms’ management did not know what changes had been made or when,” she said.

“In this case, the alterations did not impact on the FSA’s ability to do our job. The significant penalty is however intended to underscore to firms that it is of critical importance that material provided to the FSA must reflect the picture as it is – not as they might like it to be,” she added.

RBS is priming the insurance businesses, best known for the nodding dog advertising Churchill and Direct Line’s little red phone, for sale next year to meet European Union rules covering the £45bn of taxpayer bailout handed to the bank.

Paul Geddes, chief executive of RBS Insurance, said he regretted the findings. He said: “Although no customers were disadvantaged, we are very disappointed that we did not meet the standards we expect of ourselves and which the FSA expects of us.”

The problems arose after the FSA told Direct Line and Churchill that it intended to review how effectively they were handling complaints. The firms asked accountants to check a sample and found 28% of the files reviewed failed to meet the necessary stands. Staff were warned that they risked enforcement action if this continued.

In April 2010, some 50 files were sent for a formal review by the FSA, which was tipped off that some had been altered. Some 27 of the 50 files had been altered before they were sent to the FSA, and seven internal documents were found to contain staff signatures forged by one member of staff. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds