FSA takes action over irresponsible lending and orders DB Mortgages to pay customers �1.5m in compensation
The Financial Services Authority (FSA) has fined DB Mortgages, part of the Deutsche Bank Group, �840,000 for irresponsible lending practices and unfair treatment of customers in arrears.
It is the first time the FSA has taken enforcement action against a firm for irresponsible mortgage lending, and it ordered the firm to pay about �1.5m in compensation to DB Mortgages customers.
The FSA said DB Mortgages failed to look at whether there were cheaper deals available for customers seeking self-certified mortgages, failed to show that customers could afford mortgages where the term continued into their retirement, and failed to make sure customers with an interest-only mortgage had thought about where they would live if they had to sell their house to pay off the loan.
The city watchdog said DB Mortgages treated its customers unfairly when it failed to consider the individual circumstances of those in arrears, or tell them about the options available to them. The firm also applied charges in excess of the true cost of administering accounts in arrears and repeatedly charged fees to accounts in arrears.
Margaret Cole, the FSA's managing director of enforcement and financial crime, said: "Firms need to understand that we will not tolerate lax lending practices and unfair treatment of customers in arrears. 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 by their failings."
The FSA said DB Mortgages had worked in an open and cooperative way and had made significant improvements to its arrears handling procedures. Moreover, 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 �1.2m.
DB Mortgages is the fourth lender referred to enforcement following an FSA investigation into mortgage arrears handling. Previously, penalties were levied against GMAC-RFC (a �2.8m fine), Kensington Mortgages (a �1.2m fine) and Redstone Mortgages Limited (a �630,000 fine).
DB Mortgages will contact all affected customers. The FSA said if customers have any queries they should call DB on 0800 083 1203.
Source: http://www.guardian.co.uk/money/2011/feb/22/db-mortgages-fined-fsa
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