The FSA has fined Redstone Mortgages £630,000 for poor treatment of some customers in arrears and the firm will have to pay up to £500,000 in customer redress.
The failings identified by the FSA – which took place between 2007 and 2009 – include applying unfair or excessive charges, failing to ensure arrears handling staff understood treating customers fairly requirements, focussing on reducing arrears to less than two months regardless of individual circumstances, having policies which led to unnecessary use of litigation and sending out excessive and confusing correspondence.
Redstone Mortgages did not orignate loans itself, but purchased them from non-bank lenders.
Among the charges which the FSA deemed to be unfair or excessive were a fee which Redstone applied for a returned direct debit, which was imposed repeatedly no matter how many times the direct debit was returned unpaid.
Redstone also included arrears charges in the balance upon which early repayment charges were calculated.
The firm also applied a fee for litigation activities even where these activities were undertaken unnecessarily.
Under FSA rules, a firm must pay due regard to the interests of its customers and ensure they are treated fairly. The FSA says Redstone was in breach of these rules for a significant period of time.
FSA director of enforcement and financial crime Margaret Cole says: “Many of Redstone’s customers were in a vulnerable position, having fallen into arrears on their mortgage payments, and firms should not charge such customers excessive and unfair fees. This is not how the FSA expects lenders to treat customers in arrears.”
Redstone qualified for a 30 per cent reduction in its fine, down from £900,000, because it co-operated with the investigation.
The latest action comes after the FSA previously fined GMAC-RFC £2.8m and ordered it to pay £7.7m in redress last October and in April this year the FSA fined Kensington Mortgages £1.2m and ordered it to pay £1m in redress over arrears handling.