The FSA says 684 borrowers lost over £2.3m due to system and control failings at the lender. The losses were later paid back to the borrowers.
Customers affected had contracts which were subject to a retention clause where a sum of around £3,000 was withheld from the mortgage advance for six months as a condition of the loan.
The FSA says GE Money did not make it clear that borrowers would be charged interest on the full mortgage loan, including retention monies, during the six-month period.
Retention monies and accumulated interest were not always repaid to borrowers and GE Money continued to charge some borrowers interest on retention monies beyond the six-month period.
GE Money did not always deduct retention monies and interest when outstanding mortgages were redeemed.
From February 2005, GE Money changed the First National mortgage offer letter to include reference to interest charged on the full mortgage, including the retention, but it did not make this change for IGroup mortgages. The FSA says GE Money’s management agreed to change the letter and an internal audit recorded the issue as being completed, even though GE Money never amended the IGroup letters.
FSA director of enforcement Margaret Cole says: “The firm identified the systems and control failings in 2004 but despite internal recommendations that improvements be made, no corrective action was taken for more than two years.”
GE Money Home Lending chief executive Colin Shave says: “The number of affected borrowers was small compared with our overall customer base but we sincerely apologise to those affected.”