RBS 2014 Annual Report Download - page 119

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RBS – Interim Results 2015
Notes
16. Litigation, investigations and reviews (continued)
Citizens Financial Group, Inc (Citizens) has not been an issuer or underwriter of non-agency RMBS.
However, Citizens is an originator and servicer of residential mortgages, and it routinely sells such mortgage
loans in the secondary market and to GSEs. In the context of such sales, Citizens makes certain
representations and warranties regarding the characteristics of the underlying loans and, as a result, may be
contractually required to repurchase such loans or indemnify certain parties against losses for certain
breaches of the representations and warranties concerning the underlying loans. Between the start of 2009
and 30 June 2015, Citizens received US$265 million in repurchase demands and indemnification payment
requests in respect of loans originated primarily since 2003. However, repurchase demands presented to
Citizens are subject to challenge and rebuttal by Citizens.
Although there has in recent times been disruption in the ability of certain financial institutions operating in
the United States to complete foreclosure proceedings in respect of US mortgage loans in a timely manner
or at all (including as a result of interventions by certain states and local governments), to date, Citizens has
not been materially impacted by such disruptions and RBS has not ceased making foreclosures.
At this stage, as there remains considerable uncertainty around the outcome of loan repurchase related
claims it is not practicable reliably to estimate the aggregate potential impact, if any, on RBS which may be
material.
Citizens consent orders
The activities of Citizens' two US bank subsidiaries - Citizens Bank, N.A. and Citizens Bank of Pennsylvania
- are subject to extensive US laws and regulations concerning unfair or deceptive acts or practices in
connection with customer products. Certain of the bank subsidiaries’ practices with respect to overdraft
protection and other consumer products have not met applicable standards. The bank subsidiaries have
implemented and are continuing to implement changes to improve and bring their practices into compliance
with regulatory guidance. In April 2013, the bank subsidiaries consented to the issuance of orders by their
respective primary federal banking regulators, the Office of the Comptroller of the Currency (OCC) and the
Federal Deposit Insurance Corporation (FDIC) (Consent Orders). In the Consent Orders (which are publicly
available and will remain in effect until terminated by the regulators), the bank subsidiaries neither admitted
nor denied the regulators’ findings that they had engaged in deceptive marketing and implementation of the
bank's overdraft protection programme, checking rewards programmes, and stop-payment process for pre-
authorised recurring electronic fund transfers.
In connection with the Consent Orders, the bank subsidiaries paid a total of US$10 million in civil monetary
penalties. The Consent Orders also require the bank subsidiaries to develop plans to provide restitution to
affected customers (the amount of which is anticipated to be approximately US$8 million), to cease and
desist any operations in violation of Section 5 of the Federal Trade Commission Act, and to submit to the
regulators periodic written progress reports regarding compliance with the Consent Orders.