GMAC RFC will pay up to £7.7m customer redress

[Amethyst]

GMAC-RFC Limited fined £2.8million for unfair treatment of customers in arrears and repossessions and will pay up to £7.7m customer redress



FSA/PN/147/2009
29 October 2009
The Financial Services Authority (FSA) has today announced it has fined GMAC‑RFC Limited (GMAC-RFC) £2.8million for failing to treat customers fairly and secured redress of up to £7.7million (plus interest) for over 46,000 mortgage customers.
Between 31 October 2004 and 30 November 2008, a number of serious failings by GMAC-RFC were identified in relation to its dealings with customers experiencing arrears and repossessions. These include:

1. excessive and unfair charges for customers that did not reflect administration costs;
2. proposing repayment plans that did not always consider a customer’s individual circumstances;
3. inadequate training of mortgage servicing staff in handling of arrears and repossessions; and
4. issuing repossession proceedings before fully considering all the alternatives.

The case sets a precedent, with the FSA concluding this investigation in a matter of weeks, and the firm working with the FSA to agree a process to enable customers to receive redress as quickly as possible.
As a result of early settlement, the firm qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £4million.
Margaret Cole, director of Enforcement and Financial Crime, said:
“This case shows credible deterrence in action. It is an excellent example of what the FSA’s more intrusive approach can achieve for consumers, and it reflects what we said in our Mortgage Market Review last week about unfair mortgage arrears charges. Mortgage lenders and third party administrators should read this final notice and the Mortgage Market Review and take action in the interests of their customers.”

NOTES FOR EDITORS

1. The Final Notice for GMAC-RFC Ltd is available to view on the FSA website.

1. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.

[Amethyst]

Re: GMAC RFC will pay up to £7.7m customer redress

GMAC will also carry out a customer redress programme with a view to providing redress to those customers who were charged specific excessive and unfair charges (i.e. charges that were not a reasonable estimate of the costs of the additional administration required as a result of the customer being in arrears) in respect of their mortgage account. The estimated cost of redress for the period 1 November 2004 to 31 August 2009 is up to £7.7 million, plus interest, for both regulated mortgage contracts and buy-to-let contracts.


4.17.
These unfair charges were:
(1)
charges for non-payment of the monthly mortgage payment by direct debit, when the account was in arrears and no monthly payment was being made;
(2)
calculation and imposition of the Early Repayment Charge on mortgage balances which included arrears fees and charges within that balance; and
(3)
the proportion of the solicitors’ instruction fee that exceeded the actual cost.
4.18.
The above charges were unfair because they did not accurately reflect the additional administration work to the mortgage account caused by the fact that the customer was in arrears.
9

[Budgie]

Re: GMAC RFC will pay up to £7.7m customer redress

This is bloody brilliant.

Other mortgage providers must be quaking in their boots.

My GMAC paperwork is on the desk in front of me and am recalculating my claim as we speak.

If my reading of this is correct I can now reclaim

All default / failed direct debit charges

A proportion of the Solicitors fees / litigation charges

A proportion of the Early repayment charge

Plus interest ( which will be compounded of course )

WIll start a thread and let you know how it goes

Budgie

[Amethyst]

Re: GMAC RFC will pay up to £7.7m customer redress

If you're in arrears on a GMAC mortgage or have remortgaged away from it and remain at the same address, GMAC says you don't need to take action.
The company will send a letter with details of the compensation programme to affected customers charged one of the above fees since 1 November 2004. They will receive an automatic refund, plus interest, to their mortgage account.
For previous customers who have moved address, the company will send a letter to the last known address to arrange a refund by cheque. If unsure, contact GMAC on 0800 030 4662.


From GMAC

GMAC-RFC STATEMENT REGARDING SETTLEMENT WITH THE FSA ON MORTGAGE ARREARS CHARGES
29th October 2009 - GMAC-RFC today confirms that it has agreed a settlement with the Financial Services Authority regarding the company’s servicing of mortgage accounts in arrears and certain associated charges levied between 31 October 2004 and 30 November 2008.
Read the full release >>

For details on what you need to do, please download the pdf >>
For FAQs relating to this release, please download the pdf >>

Our regulator the Financial Services Authority (FSA) have identified that certain mortgage arrears fees and charges paid by current and previous mortgage account holders should be refunded because the fee or charge exceeded the actual cost to us.
Certain mortgage arrears fees and charges will be refunded in full and others in part. Refunds will also include 8% interest.
The fees and charges impacted are:-

• Charges for non-payment of the monthly mortgage payment by direct debit when the account was in arrears and no monthly mortgage payment was being made.
• A portion of the solicitor’s instruction fee (£39) that exceeded the actual cost.
• Early Repayment Charges applied to, arrears fees and charges.
• A flat rate of interest of 8% will be added to the amounts due to customers.
• No other fees or charges that may have been applied to your account are affected by this and no further refunds are due.

WHAT YOU NEED TO DO

Live Customers
If you still have your mortgage with us you DO NOT need to take any action. If you
are due a refund we will write to you no later than 30th November 2009 and any
redress will automatically be credited to your mortgage account within 30 days of that
letter. You will receive a full credit to your account, no matter how small the amount
is.

Repossessed Customers with debt outstanding (with shortfall)
If your home was unfortunately repossessed and sold, leaving an outstanding debt
owed to us, again you do not need to do anything. We will reduce by the amount of
the refund due the outstanding debt owed to us. As we may not know your current
address, it is not possible for us to write to you to confirm this, but if you have any
queries you should call freephone 0800 030 4662.

Previous Customers
Repossessed Customers with no debt outstanding (without shortfall) Customers who
have redeemed their mortgage or Customers whose loan was sold to another lender
As you no longer hold a mortgage with us, but had these charges applied to your
account while you did, please can you contact us on freephone 0800 030 4662.
Once we have verified your identity and current address, we will send a cheque to
you for any amount due. We will write to you at your last known address on up to
three occasions in an attempt to get this message to you. For previous customers
only refunds in excess of £10 total of fees and charges, plus interest will be made.
If you have moved from that address hopefully the letter will be forwarded to you. If
you have not received a letter by (30th November) and feel you are due a refund or
have any queries please call freephone 0800 030 4662.
We want to apologise to customers affected. GMAC-RFC has taken this matter very
seriously and worked openly with the FSA to review and revise our procedures for
managing customers in arrears.

Full details of the FSA’s findings can be found on
http://www.fsa.gov.uk/pubs/final/[GMACRFCpdf

[TUTTSI]

Re: GMAC RFC will pay up to £7.7m customer redress

Well roll on this applying to all Mortgage Companies who have been milking us with their excessive charges and that we amongst many others will be owed many thousands of pounds.

I have my spreadsheet at the ready.

Tuttsi

[righty]

Re: GMAC RFC will pay up to £7.7m customer redress

Excellent if no one minds I'm gonna post this on a couple of securitization threads:tinysmile_grin_t:

[scoobydoo]

Re: GMAC RFC will pay up to £7.7m customer redress

Brilliant news - they are definitely not the only company charging excessive fees and this will give hope to some posters OTR who have also had these charges included in the arrears figure used in court for possession.

[Cheshirelad]

Re: GMAC RFC will pay up to £7.7m customer redress

I heard that the FSA are investigating 3 other companies, do we know who they are?

[Amethyst]

Re: GMAC RFC will pay up to £7.7m customer redress

am sure we could have some guesses - and I will, lol, but probably wiser not to. Hopefully there will some announcements either by FSA or lenders over coming weeks.

Speaking about the four firms the FSA is currently looking to take enforcement action against, Pain says some of this enforcement action does relate to the overcharging of arrears fees

Speaking at a Treasury Select Committee evidence session this morning on mortgage arrears, the committee says it has received a number of complaints relating to arrears charges by GMAC-RFC and Kensington.

....

Uncorrected Evidence 766
Q210 Nick Ainger: We have had a large amount of evidence complaining about these high charges - again, claiming that they are to cover administrative costs. We have got complaints about GMAC and Kensington charging a standard £50 a month if you are in arrears, and we have other evidence of going up as high as £60 and £70 a month. When you hear these instances, what is the FSA doing? Clearly, these are covering a hell of a lot more than administration costs, are they not, at those sorts of rates per month?


Mr Pain: As I have already referred, we have, when we looked at the specialist mortgage market, taken enforcement action against a number of firms (four or five firms) with several under review as well. Some of those enforcement cases relate to those charges that you have referred to. So where it is brought to our attention that there are issues in those charges we do take action.

Also SPML and Lehmans backed stuff is probably on cards for similar regulatory action - http://www.widerimplications.info/as...f/20090911.pdf

[Flangies]

Re: GMAC RFC will pay up to £7.7m customer redress

I had my mortgage with GMac over two years ago in this period time mentioned and was charged many charges, prob all unfair! I will certainly be calling them for sure!! tee hee; I will continue to read on and take it all in!

I now have my mortgage with Redstone and am pleased to say only 3 late payment fees charged on this one and none since as trying soooooo hard to be good and not get charges.
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Surely it isnt just a matter of GMac writing to you and giving you an automatic refund? I see mentions of spreadsheets etc........

"If you're in arrears on a GMAC mortgage or have remortgaged away from it and remain at the same address, GMAC says you don't need to take action.
The company will send a letter with details of the compensation programme to affected customers charged one of the above fees since 1 November 2004. They will receive an automatic refund, plus interest, to their mortgage account.
For previous customers who have moved address, the company will send a letter to the last known address to arrange a refund by cheque. If unsure," contact GMAC on 0800 030 4662.

From GMAC

[Amethyst]

Re: GMAC RFC will pay up to £7.7m customer redress

I think the people (well Budgie) on about spreadsheets are previous GMAC customers who have been trying to reclaim late payment fees from pre 04, and interest etc anyways and thi shas just given them a bit more impetus to get on with it. No one needs do anything and once the letters arrive see if they are happy with what is offered.

Be interesting to see how the £10 has been arrived at.

The ERC part I think people need to be careful how its interpreted. Its not a refund of the ERC its refund of the part of the ERC calculated on the amount of the mortgage made up of unfair fees, so a small proportion of it.

All sounds very fair and reasonable to me.

[budgie3939]

Re: GMAC RFC will pay up to £7.7m customer redress

Ive spent a lot of time talking to different departments about this this afternoon. GMAC insist that the FSA have cleared them NOT to pay back the £50 arrears fee they charge every month. I queried this with several people at GMAC who all seemed to be reading from the same sheet. I told them I didnt see how they could not have to pay the arrears fees back as the FSA clearly say they are unfair.
Anyway I then phoned the FSA and the nice operator said she would check with Head Office and get back to me. This she did, within about 10 minutes.
She said Head Office of the FSA have stated that the £50 arrears fee is AN UNFAIR CHARGE and GMAC should be refunding this as well.
She told me to register a complaint with GMAC and gave me some numbers and contact details.
This Ive done and theyre going to look at my individual complaint.
I suggest others do the same. The number to ring is 01282 682574. the person to contact is Paul.Spelman@GMACRFC.co.uk.
If they dont agree I will be complaining to the Ombudsman next.
How can they say the £50 arrears fee every month is a fair charge???

[Budgie]

Re: GMAC RFC will pay up to £7.7m customer redress

Yes Ame is right, it's only those with pre 2004 charges or those who have moved mortgage company and moved house that need to do anything. Others should be contacted directly by GMAC-RFC and advised about the refund they will be having applied to their accounts.

ERC, I have changed my view on this. I originally only thought it was a part refund but reading the GMAC and FSA releases again I get the impression that it should actually be the whole of the ERC charge. My letter has already gone off and I have just demanded 39% of the ERC, in line with the % refund being suggested for the excessive Solicitors charges. Not very scientific I know but I just wanted to get the claim in. If my claim ends up going to Court I will claim 100% of the ERC as it was a fee charged upon a mortgage balance that contained unlawful charges and interest.

Ignore the £10 bit. That just means that if the total amount of the overall calculated refund ( for previous Customers ) is less than £10 then GMAC-RFC will not bother refunding it. But they will refund a total calculated refund of less than £10 if you still have a mortgage account with them. Makes sense !!!

I think the people (well Budgie) on about spreadsheets are previous GMAC customers who have been trying to reclaim late payment fees from pre 04, and interest etc anyways and thi shas just given them a bit more impetus to get on with it. No one needs do anything and once the letters arrive see if they are happy with what is offered.

Be interesting to see how the £10 has been arrived at.

The ERC part I think people need to be careful how its interpreted. Its not a refund of the ERC its refund of the part of the ERC calculated on the amount of the mortgage made up of unfair fees, so a small proportion of it.

All sounds very fair and reasonable to me.

[Flangies]

Re: GMAC RFC will pay up to £7.7m customer redress

Oh excellent; so it is as simle as this is stated below? If so I will ring them up tonight........... I must be honest I had loads of charges with them; put me in a right financial pickle which resulted in me remortgaging!

"As you no longer hold a mortgage with us, but had these charges applied to your
account while you did, please can you contact us on freephone 0800 030 4662.
Once we have verified your identity and current address, we will send a cheque to you for any amount due".
------------------------------- merged -------------------------------
I think I will wait to hear more from Budgie with regard to £50 arrears fee, as these were a lot of charges I got.

I will then call up GMac and claim whats mine tee hee

[Budgie]

Re: GMAC RFC will pay up to £7.7m customer redress

Good work Budgie3939 !!!!!!!!!!

The £50 monthly arrears charge is in my view a disguised penalty.

I have claimed back all of the failed direct debit charges and also the £50 monthly arrears charges.

Bear in mind that the redress proposal actually came from GMACRFC, it wasn't something suggested by or necessarily approved by the FSA and hasn't been tested or approved by the Court. If they do not settle my claim in full then it will definitely be tested by my local County Court.

The fact that GMAC-RFC have this FSA decision against them and have basically accepted that their charges were unlawful will make it simple to ratify the penal aspects in a court. There is no way that they can justify a monthly charge of £50 when a mortgage account is in arrears. Its like the banks monthly fee for having an unauthorised overdraft.

Budgie3939 did you get the name of the person to whom you spoke at the FSA, I would like to give them a call?

Ive spent a lot of time talking to different departments about this this afternoon. GMAC insist that the FSA have cleared them NOT to pay back the £50 arrears fee they charge every month. I queried this with several people at GMAC who all seemed to be reading from the same sheet. I told them I didnt see how they could not have to pay the arrears fees back as the FSA clearly say they are unfair.
Anyway I then phoned the FSA and the nice operator said she would check with Head Office and get back to me. This she did, within about 10 minutes.
She said Head Office of the FSA have stated that the £50 arrears fee is AN UNFAIR CHARGE and GMAC should be refunding this as well.
She told me to register a complaint with GMAC and gave me some numbers and contact details.
This Ive done and theyre going to look at my individual complaint.
I suggest others do the same. The number to ring is 01282 682574. the person to contact is Paul.Spelman@GMACRFC.co.uk.
If they dont agree I will be complaining to the Ombudsman next.
How can they say the £50 arrears fee every month is a fair charge???