Kensington fined £1.2m over arrears handling

12 April 2010 1:15 pm | By Helen Pow

The firm is set to pay an additional £1m in redress to customers who were in arrears and charged specific unfair or excessive charges.

The FSA identified a number of serious failings by Kensington which occurred between January 1, 2007 and October 31, 2008 in relation to its mortgage arrears handling processes and in its dealings with customers in arrears.

It found the firm failed to ensure mortgage servicing staff had adequate understanding of treating mortgage arrears customers fairly and concentrated on the repayment of mortgage arrears over a short period of time rather than agreeing an arrangement to pay the arrears based on the customer’s individual circumstances.

The FSA also slammed the firm for applying three charges to customers’ accounts that were unfair or excessive.

Customers were charged a fee for a returned direct debit regardless of how many times the direct debit had already been returned unpaid, an excessive fee for cancelled direct debits, which did not reflect administrative costs and an early repayment charge on mortgage balances, which included arrears fees and charges within that balance.

Kensington also failed to take reasonable care to ensure adequate risk management systems were in place, according to the FSA. The firm’s management information focused on the performance of its mortgage book and the profitability of the business rather than on treating customers fairly.

Kensington qualified for a 30 per cent discount. Without this the fine would have been £1.75m.

Director of enforcement and financial crime Margaret Cole says: “This case should serve as a strong reminder to firms dealing with retail customers, especially customers in a vulnerable position such as those with mortgage arrears, that the FSA will take robust action where it sees that customers are not treated fairly.

“Retail firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged.”

A statement released today by Kensington says: “Kensington confirms we have agreed a settlement with the Financial Services Authority following an investigation into the servicing of mortgage accounts in arrears and certain associated charges during the period 1st January 2007 to 31st October 2008.

“We apologise to all those customers who were impacted during this period and we are working to redress those customers affected as quickly as possible.

“This was a retrospective investigation into arrears processes and our charges were in line with the market at the time. However, we acknowledge that there were certain fees where it was felt that the charge did not accurately reflect the additional work and cost incurred by Kensington. We no longer charge these fees and will be writing to customers who have been affected.”

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