GMAC-RFC was fined £2.8m – more thandouble the previous highest penalty for a mortgage case – for unfair treatment of customers. It was also ordered to pay £7.7m in refunds to over 46,000 borrowers who were victims of serious failings between October 2004 and November 2008.
These failings included issuing repossession proceedings before fully considering all alternatives, excessive administration charges, proposing repayment plans without considering a customer’s circumstances and poor training of staff who dealt with arrears and repossessions.
In response, the lender said it will send a letter with details of a redress programme to affected customers. Following this, existing customers will receive an automatic re-crediting of the charges plus interest to their accounts.
Margaret Cole, director of enforcement at the FSA, said the case was an example of the
regulator’s more intrusive and interventionist approach to regulation.
She added: “This case shows our policy of credible deterrence in action. It reflects our
views in the Mortgage Market Review about unfair mortgage arrears charges. Lenders
and third-party administrators must read the notice and take action in the interests of
their customers.”
A spokesperson for GMAC-RFC apologised to customers, saying: “While our arrears charges were in line with the market, in hindsight, we fully accept that for certain
fees, our estimates of the costs were not proportionate to the additional administration
actually required.”
Alan Cleary, managing director of Exact Mortgage Experts, said administrators and lenders needed to ensure their arrears handling processes were robust and up to date.
He added: “The fine is a warning for administrators and lenders to clean up their act and ensure that they are treating customers fairly. Lenders must look at the way they charge
borrowers in arrears and change how they deal with these customers if necessary or else
there will be more fines.”
Andrew Montlake, director at Coreco Group, said the regulator was correct to say that many of the administration charges from lenders were excessive and unfair.
He added: “I understand that lenders are running businesses but some go overboard.
Many are also far too quick off the mark in looking at repossessions as a first resort and
they do not explore ways to make it fairer for people in difficulties.”
