Brokers are warning that the FSA could fine more sub-prime lenders for inadequate lending practices, following the £840,000 fine levied on DB Mortgages.
The sub-prime firm, part of Deutsche Bank Group, was fined this week for irresponsible lending practices and unfair treatment of customers in arrears. The regulator also secured redress of around £1.5m for customers.
This is the first time the FSA has taken enforcement action against a firm for irresponsible mortgage lending.
DB Mortgages is the fourth lender to be referred to enforcement following the FSA’s thematic project on mortgage arrears handling. Final notices have also been given to GMAC-RFC, Kensington Mortgages and Redstone Mortgages.
First Action Finance head of communications Jonathan Cornell believes there are other sub-prime lenders that had similarly poor lending practices. He says: “The things DBM were fined for were fairly catastrophic. I would hope there are no other lenders in that position but I suspect there will be some guilty of the same to some extent. I would have thought some of the specialist lenders are slightly more culp- able than mainstream lenders.”
John Charcol senior technical manager Ray Boulger says some sub-prime lenders did not have appropriate arrears handling practices in the past and this could lead to further fines.
He says: “I think we all know that being rather robust in the treatment of those in arrears was something that perhaps some of the sub-prime lenders went too far on. It is likely that the FSA is probably investigating several other sub-prime lenders.”
London & Country head of communications David Hollingworth says: “I think the FSA is signalling its intent to look more closely at lenders’ behaviour from now on.”