The firm has agreed to redress customers who were charged unfair and/or excessive charges while they were in arrears. After the discount it is estimated the penalty will cost the firm up to £500,000.
Redstone is the third lender referred to enforcement, following similar arrears handling notices to GMAC-RFC and Kensington Mortgages.
The financial watchdog found a number of “serious failings” by Redstone’s arrears handlers between 1 January 2007 and 5 August 2009.
The firm’s call-centre staff were inadequately trained in Treating Customers Fairly, and often advised clients to repay arrears within a two-month time frame regardless of ability to pay and their circumstances.
Staff also resorted to “unnecessary use of litigation” to get repayments from clients and often sent “repetitive, excessive and confusing correspondence.”
The firm charged clients fees which were both unfair and excessive, according to the FSA, including unlimited charging for returned direct debits. The firm added arrears fees and charges on to the mortgage balance on which an early repayment charge was calculated.
The firm also charged arrears clients for field counsellor visits and a fee for litigation, even when Redstone launched a legal action with no reason.
A firm must pay due regard to the interests of its customers and ensure they are treated fairly, said the FSA. Redstone was in breach of these rules for a significant period of time, it added.
Margaret Cole, director of enforcement and financial crime, said: “Many of Redstone’s customers were in a vulnerable position, having fallen into arrears on their mortgage payments, and firms should not charge such customers excessive and unfair fees. This is not how the FSA expects lenders to treat customers in arrears.
“Rather than assessing each customer’s personal and financial circumstances on an individual basis, the firm was applying a one size fits all approach by aiming to reduce arrears to less than two months.
“The FSA is committed to clamping down on mortgage lenders who fail to adhere to treating customers fairly rules. We are crystal clear about the standards we expect and will take tough actions against firms who breach these rules. “
Redstone qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £900,000.
