The City watchdog Financial Services Authority (FSA) has fined GMAC‑RFC Limited (GMAC-RFC) £2.8million for failing to treat customers fairly and ordered them to pay back, with interest nearly £8million to 46,000 of its mortgage customers.

Because the mortgage lender co-operated they qualified for a 30% (£1.2 million) discount under the FSA’s settlement discount scheme, without the discount the fine would have been £4million.

Between 31 October 2004 and 30 November 2008 the FSA said GMAC had been guilty of "serious failings" which included:

• excessive and unfair charges for customers that did not reflect administration costs;

• proposing repayment plans that did not always consider a customer’s individual circumstances;

• inadequate training of mortgage servicing staff in handling of arrears and repossessions; and

• issuing repossession proceedings before fully considering all the alternatives.

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.”

Customers who currently have a mortgage with GMAC and have been in arrears or have re-mortgaged but remain at the same address will not have to do anything as the lender will notify any borrower who was charged one of the above fees since 1 November 2004.

After that date borrowers who are still with the lender will have the compensation, plus interest, refunded to their mortgage accounts, thus reducing reduce the level of mortgage outstanding.

Any borrower that believes they were treated unfairly over their arrears and has since moved from the property can call GMAC-RFC direct on 0800 030 4662.

GMAC-RFC have also issued a statement on their website together with downloads of what to do if you feel affected, more on this can be found here. 

DebtWizard comment

Well done FSA for working faster than normal on this with a good result for the borrower. Had GMAC-RFC not co-operated then the fine would have been considerably higher. I have looked at their website and they genuinely appear to want to redress this situation.

This could be the first time that a mortgage lender has been called in on this and there are numerous other lenders wondering when they will feature next.

Good news for the battered consumer, well done FSA.