Tweet
Redstone Mortgages Limited fined £630,000 for unfair treatment of some customers in arrears
Margaret Cole
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.
FSA/PN/120/2010
15 July 2010
The Financial Services Authority (FSA) has today fined Redstone Mortgages Limited (Redstone) £630,000 for poor treatment of some customers facing mortgage arrears.
The firm has agreed to redress customers who were charged unfair and/or excessive charges while they were in arrears. It is estimated that the redress will cost the firm up to £500,000.
The FSA has identified a number of serious failings by Redstone which occurred between 1 January 2007 and 5 August 2009 in relation to its mortgage arrears handling processes and in its dealings with customers in arrears.
These include:
These were:
Under FSA rules, a firm must pay due regard to the interests of its customers and ensure they are treated fairly. Redstone was in breach of these rules for a significant period of time.
Margaret Cole, director of enforcement and financial crime, said:
"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.
"Rather than assessing each customer’s personal and financial circumstances on an individual basis, the firm was applying a one size fits all approach by aiming to reduce arrears to less than two months.
"The FSA is committed to clamping down on mortgage lenders who fail to adhere to treating customers fairly rules. We are crystal clear about the standards we expect and will take tough actions against firms who breach these rules. "
Redstone qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £900,000. The FSA has taken into account that Redstone worked in an open and co-operative way with the FSA and has made significant improvements to its arrears handling and mortgage litigation procedures.
Notes for editors
Margaret Cole
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.FSA/PN/120/2010
15 July 2010
The Financial Services Authority (FSA) has today fined Redstone Mortgages Limited (Redstone) £630,000 for poor treatment of some customers facing mortgage arrears.
The firm has agreed to redress customers who were charged unfair and/or excessive charges while they were in arrears. It is estimated that the redress will cost the firm up to £500,000.
The FSA has identified a number of serious failings by Redstone which occurred between 1 January 2007 and 5 August 2009 in relation to its mortgage arrears handling processes and in its dealings with customers in arrears.
These include:
- Failing to ensure mortgage servicing staff acting on its behalf had adequate understanding of treating mortgage arrears customers fairly;
- Focusing on reducing arrears to less than two months, regardless of the customer’s personal and financial circumstances;
- Having written policies that led, in some cases, to the unnecessary use of litigation to secure arrangements to pay;
- Sending repetitive, excessive and confusing correspondence; and
- Applying four charges to customers’ accounts that were unfair and/or excessive.
These were:
- A fee for a returned direct debit which was charged regardless of how many times the direct debit had already been returned unpaid;
- Including arrears fees and charges in the balance on which an early repayment charge was calculated;
- Charging for field counsellor visits in full to some customers who had not been properly informed of the timing of the visit and/or of their right to refuse or cancel the visit; or who should have been charged a reduced rate cancellation fee; and
- A fee for litigation activities, which was applied even when such activities were taken by Redstone unnecessarily.
Under FSA rules, a firm must pay due regard to the interests of its customers and ensure they are treated fairly. Redstone was in breach of these rules for a significant period of time.
Margaret Cole, director of enforcement and financial crime, said:
"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.
"Rather than assessing each customer’s personal and financial circumstances on an individual basis, the firm was applying a one size fits all approach by aiming to reduce arrears to less than two months.
"The FSA is committed to clamping down on mortgage lenders who fail to adhere to treating customers fairly rules. We are crystal clear about the standards we expect and will take tough actions against firms who breach these rules. "
Redstone qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £900,000. The FSA has taken into account that Redstone worked in an open and co-operative way with the FSA and has made significant improvements to its arrears handling and mortgage litigation procedures.
Notes for editors
- The Final Notice for Redstone Mortgages Limited can be found on the FSA website.
- Redstone is the third lender referred to enforcement following the FSA’s thematic project mortgage arrears handling. Final notices were also given for GMAC-RFC and Kensington Mortgages.
- In June 2009, the FSA published the results of a review which found continued weaknesses in the way specialist lending firms were handling mortgage arrears and repossessions.
- In July 2010 the FSA outlined proposals to ensure all mortgages are carefully assessed to make sure borrowers can afford them. This consultation paper forms the first follow up to the mortgage market review discussion paper published in October 2009. Consultation on these proposals will close in November 2010.
- The FSA regulates the financial services industry and has five 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; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.
Comment