The Financial Conduct Authority has imposed its largest ever fine of almost £1m on a retail sole trader for “deliberately misleading” vulnerable customers over sale and rent back agreements.
Birmingham-based Gurpreet Singh Chadda, who traded under the names Red2Black Homes and B&L Homes, has been fined £945,277 and banned from working in the financial services industry.
The FCA investigated Chadda’s involvement in seven sale and rent back transactions between June 2009 and January 2010 and found serious failings in all of them.
Under sale and rent back deals, homeowners sell their home and rent it back from the person arranging the transaction. The deals allow homeowners, who may be selling due to financial difficulties and a need to raise money to pay arrears, to stay in their homes and avoid repossession.
Chadda misled homeowners selling their properties by telling them he would be buying their homes, when the homes were actually being bought by other people.
He failed to notify sellers that buyers were not authorised or regulated by the FCA, which meant they would be unable to complain to the Financial Ombudsman Service or the Financial Services Compensation Scheme if something went wrong.
Chadda also helped buyers obtain mortgages based on misleading information; falsely claimed that properties would be sold based on an independent valuation; and misled sellers about how much their properties were worth.
The FCA also said sellers were charged “grossly unfair and excessive hidden fees”.
In three cases sellers got less than half of the value of their property, and in two out of the three cases the seller received only 38 per cent of the sale price of their homes. Meanwhile Chadda was receiving the full price for the properties from the buyers.
The FCA believes Chadda was paid £695,277 from the seven transactions. His penalty including the recouping of these charges.
Chadda failed to disclose relevant information to the FCA, created misleading documents, and arranged for people to impersonate his customers in order to mislead the FCA.
FCA director of enforcement and financial crime Tracey McDermott says: ”Chadda’s misconduct is the most shocking we have seen from a home finance arranger. He is a disgrace to financial services.
“He deliberately misled his clients for his own personal gain and then repeatedly and cynically lied to the FCA. Chadda is not fit to work in regulated financial services and he presents a serious risk to customers and lenders alike with his dishonest and unscrupulous actions. The unprecedented level of the fine for a sole trader reflects our determination to deprive him of the gains he made as a result of his misconduct.”