Today’s FSA fines for failings in the sub-prime market are significant both in the message it sends out to this segment of the mortgage market and, in the context of next year1s TCF deadlines, as a warning the FSA is prepared to get tough with small firms.
The FSA has banned one firm and fined two others for having inadequate mortgage sales and advice procedures in place exposing customers to the risk of receiving unsuitable advice.
It has banned Homebuyer Securities Limited from trading and fined The Loan Company, trading as Greenhill Finance, £31,500 and Next Generation Mortgages Limited £10,500.
NGM has also agreed to stop selling self-certification mortgages and all three firms have agreed to conduct a costly past business review to identify whether customers have suffered losses as a result of receiving unsuitable advice.
The failings were uncovered as part of the FSA’s sub-prime investigations which were published over the summer.
In announcing the penalties, director of enforcement Margaret Cole said any firm putting their customers at risk through inadequate business processes can expect strong action from the FSA.
FSA director of TCF Sarah Wilson warned recently that firms were being too slow to implement its TCF programme and promised significant regulatory consequences for firms who did not meet its December 2008 deadline.
Today’s fines show the FSA is very much prepared to stand by these words.
To further confirm this point, FSA director of small firms Stephen Bland told the Personal Finance Society conference last week that advisers fees may go up in the short term to weed out the ³rogues².
Northern Rock has risen back to the top of the political landscape with growing worries over the amount the Government has lent the bank and concern that any loans continued after February will break European law.
The Government is currently in a very sticky situation and is in discussions with the European Commission as to whether its loans of over £25bn to Northern Rock can continue or whether they will be banned under European state aid rules.
European rules on state aid mean the sums lent to Northern Rock need to be repaid within six months of the lender of last resort facility being set up, but the Treasury is hoping the loan can be changed to restructuring aid to get around this.
In a statement released today, the Government said proposals for the future of the Northern Rock business will be viewed favourably if they are not conditional upon European Commission approval of further aid measures.
It said bidders should not expect a continuation of the loan facility but that the Treasury would listen to proposals for Northern Rock that meant authorities going beyond their usual statutory and regulatory functions.
Acting Lib Dem leader Vince Cable has called on the Government to nationalise Northern Rock for a period of time to safeguard taxpayers money and then sell the bank on in the future.
The Conservatives are also piling on the pressure using the affair to personally attack Chancellor Alistair Darling for lacking the leadership skills required to sort out the mess.
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