The RBS chief executive has said he is "extremely disappointed" at the way NatWest had dealt with a case in which the lender threatened to revoke the mortgage of a buy-to-let borrower when it discovered she let to a benefit claimant.
In a letter to the Work and Pensions committee on November 1, released today (November 21), RBS chief executive Ross McEwan said he had personally reviewed the case and found it "did not reflect the values" of the lender and had not been dealt with appropriately.
The letter came in response to correspondence from chair of the committee, Frank Field, who likened the incident to a return to the "wicked old days of housing discrimination".
The case in question refers to Helena McAleer, a landlord from Northern Ireland, who claimed NatWest threatened to revoke her buy-to-let mortgage when she contacted the bank to discuss releasing equity from her property.
Ms McAleer said the lender had cited its policy prevented rentals to benefit claimants and instructed her to "seek an alternative tenant", although it is understood NatWest did not tell her to evict the tenant.
In his letter to the committee Mr McEwan said he had identified a number of areas for improvement and regretted the way in which the case had been handled.
The letter read: "A member of our home buying and ownership team has spoken to the customer and offered our apologies and explained that we will be looking again at our policy in this area."
Mr McEwan said the lender is now in the process of conducting a review of its buy-to-let policies and was grateful the case had provided an opportunity to address any policy issues.
Mr McEwan's letter follows intervention from the Work and Pensions committee which said it was "deeply concerned" about the extent to which mortgage providers prevented landlords from renting to benefit claimants.
Mr Field said allowing banks to operate a "no DSS" policy was a return to the "wicked old days of housing discrimination".
He said: "Claimants are effectively blacklisted for housing and at risk of being senselessly evicted for no greater crime than receiving housing benefit.
"NatWest is now taking a look at its policy, and other mortgage lenders will no doubt follow suit. If the change we need to protect people is not forthcoming voluntarily, we may need to look to regulation."