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FSA fines DB Mortgages £840,000

The FSA has fined DB Mortgages, part of the Deutsche Bank Group, £840,000 for irresponsible lending practices and unfair treatment of customers in arrears.

The regulator also secured redress of approximately £1.5m for customers of DB Mortgages.

This is the first time the FSA has taken enforcement action against a firm for irresponsible mortgage lending.

The regulator says on lending practices, DB Mortgages failed to show that customers could afford mortgages sold where the term continued after their retirement and failed to consider whether there were cheaper mortgages available for customers seeking self-certified mortgages.

The lender also failed to ensure customers had thought about where they would live at the end of the term if they needed to sell their house to pay off an interest-only mortgage.

On the treatment of customers in arrears, DB Mortgages did not consider customers’ individual circumstances or tell them about the range of options that were available to them. It also applied charges that were unfair because they were charged repeatedly, or did not accurately reflect the cost of administering an account in arrears.

The FSA says it has taken into account that DB Mortgages worked in an open and co-operative way with the FSA and has made “significant improvements” to its arrears handling procedures.

As a result of early settlement, the firm qualified for a 30 per cent discount under the FSA’s settlement discount scheme. Without the discount, the fine would have been £1.2m.

DB Mortgages is the fourth lender to be referred to enforcement following the FSA’s thematic project on mortgage arrears handling.

Final notices were also given to GMAC-RFC, Kensington Mortgages and Redstone Mortgages Limited.

FSA managing director of enforcement and financial crime Margaret Cole says: “This is the first time that we have taken enforcement action against a firm for irresponsible mortgage lending. Firms need to understand that we will not tolerate lax lending practices and unfair treatment of customers in arrears.

“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 by their failings.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Christian Patricot 22nd February 2011 at 10:22 am

    Have I read this properly? A bank lending money for residential mortgages was involved in helping their clients to get self certified mortgages? I thought many of their CEOs had appeared in front of the House of Commons select committee a year or so ago swearing blind they had no knowledge and would never condone such practice. Surely, the FSA has made a mistake in their apparent conclusion? We MUST congratulate the FSA in taking a fair and balanced approach in the fine they have asked DB to pay. As a bank I think they may have found it difficult to pay £1.2m and jobs may have been at risk. Well done FSA, keep up the good work….morons.

  2. Michael Wainwright 22nd February 2011 at 10:30 am

    “The lender also failed to ensure customers had thought about where they would live at the end of the term if they needed to sell their house to pay off an interest-only mortgage.” I had my first interest only mortgage forty two years ago and am just about to pay of the last part. I would have thought the lender daft if I had been asked where I would live at the end of each mortgage period – looking forward five years is hard enough, 15-25 years is impossible.

  3. Nice to see the FSA are not only punishing banks for their wrongdoing but ensuring that customers are not left out of pocket too.

    Any chance we can expect the FSA to approach IFA networks in the same way or does this professionalism only apply to the banking sector.

    In the mean time IFA networks seem to be avoiding their liabilities with no sanction from the FSA and have ‘carte blanche’ to to turn a blind eye when their IFAs cost customers untold amount of money.

    Isnt it about time the FSA enforced the regulations across the whole industry and not just in a select few cases???

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