Kensington Mortgage Company Limited (Kensington) has been fined £1.225 million by the Financial Services Authority (FSA) for what it describes as poor treatment of some customers facing mortgage arrears.
The firm will now redress customers who were in arrears and charged specific unfair and/or excessive charges between 1 January 2007 and 31 October 2008. The cost to the firm has been estimated to be up to £1.066 million.
The FSA has identified a number of serious failings by Kensington which occurred, these include:
- Failing to ensure mortgage servicing staff acting on its behalf had adequate understanding of treating mortgage arrears customers fairly;
- Concentrating on the repayment of mortgage arrears over a short period of time rather than agreeing an arrangement to pay the arrears based on the customer's individual circumstances;
Applying three 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;
- An excessive fee for cancelled direct debits which did not reflect administrative costs;
- An early repayment charge on mortgage balances which included arrears fees and charges within that balance.
The FSA also stated that firm ‘failed to take reasonable care to organise and control its affairs responsibly and effectively, and to ensure adequate risk management systems’ and that ‘Its management information focused on the performance of the firm's mortgage book and the profitability of the business, rather than on treating customers fairly’.
Kensington received a 30% discount under the FSA's settlement discount scheme for agreeing to settle. Without the discount the fine would have been £1.75 million.
What helped the Kensington was that they made significant improvements to its arrears and repossession processes since the early part of 2008.
Margaret Cole, director of enforcement and financial crime, said:
"This case should serve as a strong reminder to firms dealing with retail customers, especially customers in a vulnerable position such as those with mortgage arrears, that the FSA will take robust action where it sees that customers are not treated fairly. Retail firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged."
Further reading
46,000 mortgage holders to receive £7.7m as FSA fines GMAC-RFC Ltd £2.7m for mis-treating borrowers
