GE Money Fined On Home Loans By FSA
The Financial Services Authority (FSA) is starting to get tough on providers of mortgages and home loans who are not seen to be treating their customers fairly and overcharging them on their loans.
The financial regulator and watchdog has sent a clear message to all providers of mortgage loans, by issuing a fine of £1.12 million to GE Money Home Lending for inadequate controls on their systems which led to a number of borrowers being overcharged on their home loan.
In total, 684 borrowers were affected by the error, which resulted in them suffering a financial loss of £2.3 million. Although all the customers affected were compensated for the loss, the FSA were concerned that the terms and conditions of the loans were not clear enough to customers and also that action was not taken quickly enough to remedy the situation and these failings by the lender had led to customers, some of whom had bad credit loans, suffering a financial loss.
The borrowers who were affected were those whose mortgage or home loan was subject to a retention by the lender. This is where a part of the mortgage loan advance in withheld by the lender for a period of time, usually until some remedial work is carried out on the property to rectify problems with the structure.
The FSA were concerned that it was not made clear in the terms and conditions of the loan advance that interest would be charged on the full mortgage balance and also that the retained funds were not released to the customer quickly enough, once the necessary work had been carried out.
GE money have now fully compensated those concerned and has amended its terms and conditions to remove the chance of any future problems.
Margaret Cole from the FSA said “The firm identified the systems and control failings in 2004, but despite internal recommendations that improvements be made, no corrective action was taken for more than two years. I emphasise that we expect high standards by lenders in their administration of their mortgage book.”
