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.”