GMAC-RFC fined £2.8m by FSA, to pay up to £7.7m customer redress
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The FSA has fined GMACRFC £2.8m for failing to treat arrears and repossessions customers fairly.
The regulator has secured redress of up to £7.7m, plus interest, for over 46,000 mortgage customers.
Between October 31, 2004 and November 30, 2008, GMAC-RFC charged excessive and unfair charges for customers that did not reflect administration costs.
It also proposed repayment plans that did not always consider a customer’s individual circumstances, had inadequate training of mortgage servicing staff in the handling of arrears and repossessions and issued repossession proceedings before fully considering all the alternatives.
GMAC-RFC agreed to an early settlement and qualified for a 30 per cent discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £4m.
FSA director of enforcement and financial crime Margaret Cole says: “This case shows credible deterrence in action. It is an excellent example of what the FSA’s more intrusive approach can achieve for consumers, and it reflects what we said in our mortgage market review last week about unfair mortgage arrears charges.
“Mortgage lenders and third party administrators should read this final notice and the Mortgage Market Review and take action in the interests of their customers.”
GMAC-RFC says in a statement: “We want to apologise to customers affected. We have worked openly with the FSA to review and revise our procedures for managing accounts in arrears.
“Whilst our arrears charges were in line with the market, in hindsight, we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required. We will be writing to customers who incurred these specific charges when in arrears and will re-credit the charges plus interest.”
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Readers' comments (19)
Julian Stevens | 29 Oct 2009 11:00 am
As always, what rules and regulations were in place at the time these felonies were committed? If the answer is none, which is almost certainly the case because the FSA seems to have done virtually nothing but fanny about for the first four years of its appointment as regulator of mortgages and lending, then this isn't deterrence, it's punishment in the wake of yet another hindsight review.
Now, I am not for one moment condoning the actions of GMAC-RFC, but they should at least have been made aware by the FSA of their duties and responsibilities. As I see it, these never ending hindsight reviews are just a dirty and unjust pretence that the FSA is doing its job properly. Patently, it doesn't.
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Anonymous | 29 Oct 2009 11:18 am
So what happens to the people that lost there houses because of this? I don't see a refund and a bit of compensation as being 'fair justice'!
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derekt | 29 Oct 2009 11:21 am
fsa fine on Gmac.where does the money from the fine go? i am sure they will tell us that the FCS levy will need to go up due to the claims on GMAC?
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Evan Owen | 29 Oct 2009 11:37 am
In march 2007 a house was repossessed after the 69 year-old had failed to keep up payments on a series of secured loans. A few years previous his other home had been repossessed following bankruptcy.
The currect repossession has remained unsold for almost three years! How much has the lender racked up in 'fees' and 'expenses' or whatever? It has been through three estate agents where potential purchasers have wasted a fortune on structural surveys, mortgage application fees and solicitors, it has also been through three auctions without a sale.
Why? Because the lender has been rather silly regarding legal easements which do not exist. Who pays? The poor old codger who was loaned money when he was too old and decrepit to earn the money to repay it.
Hope the FSA also takes that lender to task.
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Adrian Franks | 29 Oct 2009 11:50 am
As is always the case with regulators globally, the FSA get involved after consumers blood is on the floor and then trumpet what a great deterrent the fines are for companies in the future. Where were they when consumers were going through all the heart ache?
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Anonymous | 29 Oct 2009 12:18 pm
Having once asked the FSA what was a reasonable level to set for mortgage advice fees, the answer came back that the level of the fee was unimportant, providing I could adequately demonstrate that the customer was fully aware of what exactly was being charged proir to committing to any financial outlay.
Surely the same principle should apply to lenders charges, remembering that in most instances the mortgage will have been sold by an intermediary? Or will the FSA now seek to punish intermediaries for using lenders with what they consider to be excessive fees.
In any event it might be worth contacting the FSA to check that you won't be subjected to potential enforcement action if the FSA consider your advice fees to be unreasonable!
An interesting subject in consideration of the FSA's murmurings with regard to the payment of proc fees going forward.
This now appears to be another example of double standards & as another respondent put it, an attempt by the FSA to make it look like it's doing its job!
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Jackson Cohen | 29 Oct 2009 12:25 pm
The rules were always in place and the FSA have issued plenty of warnings to lenders about the fair treatment of customers in arrears and the concerns they have.
This is one of those times when the FSA can't be accused of using hindsight. It is also likely that their investigation started a considerablly long time ago as there is a significant delay before it gets to the stage of publishing the final notice.
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Anonymous | 29 Oct 2009 1:14 pm
Am I missing something here?
The FSA has levied a fine of £2,800,000 on this lender "for treating 46,000 customers unfairly" over a period of 4 years???.
This works out as a tiny fine of £60 for every customer treated unfairly,
These customers were amongst the most vulnerable and were clearly abused and bullied by their lender.
Good to see the FSA have set their price benchmark for Treating Customers Fairly at a mere £60 per mistreated customer. The banks must be thrilled by this outcome as it leaves plenty of money in the kitty for future fat cat bonuses.
Let's wait and see if any IFA is EVER fined as little as £60 for treating a client unfairly .... don't hold your breath!
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Jackson Cohen | 29 Oct 2009 1:19 pm
In response to the above comment with regard to the level of fees the situation is quite straightforward.
The FSA (currently anyway) is not an arbiter of price. Therefore if an intermediary clearly sets out in advance how much he charges for advice and the client is happy to pay he can charge as much as he likes.
The difference with arrears is that the fees being charged are required to reflect the cost incurred - they are not a profit making entity. Why should companies hit people who are struggling with costs associated with marketing etc? It isn't right or fair.
It is no different to the exit administration fee a couple of years back when lenders had to change the fee to reflect the cost and not a profit margin - seem to remember intermediairies being very happy at that time!
If you are charging an arrears handling charge then the fee should reflect the cost of this and nothing else. That is what the FSA have told lenders to do so those who don't deserve to be hit.
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Anonymous | 29 Oct 2009 2:17 pm
if repossession has already occured, obviously the people have moved, then how will GMAC find them to compensate them. These people will have had no other products like current accounts.
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