A review by the FSA last year of financial advertising in the sub-prime mortgage market highlighted that Swindon-based Select had issued unclear financial promotions and had weaknesses in its management systems in relation to the sale of mortgage products generally, not only sub-prime.
The subsequent investigation found evidence that Select failed to ensure its financial promotions accurately described its ‘Capital Repayment Plan’, meaning customers did not receive reliable information to help them make informed choices and achieve a fair deal.
The FSA also found that Select had inadequate sales processes in place for the recommendation of mortgages to customers and did not have appropriate management systems and controls in place to ensure that the firm met the necessary regulatory requirements.
FSA director of enforcement Margaret Cole says: “Taking out a mortgage is one of the most important decisions anyone makes during their life. Poor practice by firms in this area therefore poses a high risk to consumers – and this is particularly the case when it comes to sub-prime mortgages, given the vulnerable nature of the target audience.
“It is essential that firms’ financial promotions are clear, fair and not misleading, so that consumers know exactly what they are buying. In addition, firms need to have the right sales processes in place so that they recommend suitable mortgages.”
Select says it has put in place controls to ensure that its future mortgage business meets the required standard and has also agreed to write to all of its existing customers to inform them of the risks associated with its CRP.