Fine for lender over misleading customers
October 20, 2008
A well known lender, GE Money, has been fined a massive £1 million by the UK’s financial regulator, the Financial Services Authority, which claims that the lender engaged in unfair lending practices that left its customers worse off. GE Money Home Lending has been fined £1.2 million in total, and this was because it was found to have lost seven hundred of its mortgage customers around £2.3 million in total because it mis-managed their mortgages.
The lender is said to have brought the problems on its books to light in 2004, reimbursed its customers, and investigated where the problem had arisen. However, despite this the fine was still imposed by the FSA.
Industry officials have said that this shows just how seriously the regulator is taking mortgage related problems amongst lenders, and how it is prepared to take action by financially penalising the firms.
An official from the Financial Services Authority stated: ‘The firm’s failings were serious because a large number of borrowers, including some with impaired or non-standard credit profiles, were put at risk of financial loss. 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. I emphasise that we expect high standards by lenders in their administration of their mortgage book.’
It appears that crux of the problem started amidst borrowers that needed to conduct repairs on properties that they had bought in order to increase the value of the property to the amount that they had borrowed by way of a mortgage. £3000 of each customer’s money was retained for six months by GE and should have been returned after that period, plus any interest, by GE. However, GE was found to have either not repaid the money or not repaid the interest on the money.
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