The Financial Services Authority (FSA) regulates the mortgage market and has this week fined mortgage lender GE Money Home Lending £1.12 million.
The fine was as a result of discrepancies where 684 customers had retention clauses in their contracts. A retention clause is common practice. This means that the mortgage lender will withhold some of the mortgage loan whilst work is being carried out on the property to bring it up to the required standard. However, the FSA said that this clause did not make it clear that interest would still be charged on the retained amount.
In addition, the money was retained for up to six months and in some cases was not paid back to the borrower on time and yet they were still charged interest on it. This meant that each customer lost around £3,000 on average.
GE Money Home Lending had already paid out compensation to the customers, so the fine is an additional cost to them.
The FSA Director of Enforcement, Margaret Cole, said:
“The firm’s failings were serious because a large number of borrowers, including some with impaired or non-standard credit profiles, were put at risk of financial loss.”
GE Money Home Lending has now reviewed its mortgages, including those taken out before the FSA started regulating the market back in 2004.
