Mortgage lender fined £1.12 m
Updated on 25 September 2008
A mortgage lender has been fined £1.12 million by the City watchdog for failings which led to borrowers losing £2.3 million.
The Financial Services Authority said the fine on GE Money Home Lending was the first it had ever imposed on a mortgage lender in relation to its lending processes.
A total of 684 borrowers were affected by the problems at the group, losing an average of more than £3,000 each, although they have since been paid compensation.
The failings related to customers who had mortgages with a so-called retention clause.
Under these loans a sum of around £3,000 was withheld from the mortgage advance, typically where the borrower was required to carry out specified repairs on their property.
The terms and conditions stated that the money would be withheld for six months, but during this time the borrower was charged interest on the full loan amount.
After six months the money that had been retained and the interest that had been paid on it should have been released to the borrower or used to reduce their outstanding mortgage balance.
But the FSA said due to inadequate systems and procedures at the firm, this did not always happen, and the firm continued to charge interest on the retention money to some borrowers.
When borrowers with an outstanding sum redeemed their mortgages, the firm also in some cases failed to deduct it and the interest that had accumulated on it from the total amount owed, meaning borrowers paid back more than they should have.
The regulator added that GE Money's terms and conditions also did not make clear to all customers that they would be charged interest on the retention sum during the first six months, even though they did not have the money.
These news feeds are provided by an independent third party and Channel 4 is not responsible or liable to you for the same.
