Kensington Mortgage Company Limited fined GBP1.225 million for unfair treatment of some customers in arrears and will pay estimated GBP1.066 million customer redress
12th April 2010The Financial Services Authority (FSA) has today announced it has fined Kensington Mortgage Company Limited (Kensington) GBP1.225 million for poor treatment of some customers facing mortgage arrears.
The firm has agreed to redress customers who were in arrears and charged specific unfair and/or excessive charges. It is estimated that the redress will cost the firm up to GBP1.066 million.
The FSA has identified a number of serious failings by Kensington which occurred between 1 January 2007 and 31 October 2008 in relation to its mortgage arrears handling processes and in its dealings with customers in arrears.
These include:
- Failing to ensure mortgage servicing staff acting on its behalf had adequate understanding of treating mortgage arrears customers fairly;
- Concentrating on the repayment of mortgage arrears over a short period of time rather than agreeing an arrangement to pay the arrears based on the customer's individual circumstances;
- Applying three charges to customers' accounts that were unfair and/or excessive. These were:
- A fee for a returned direct debit which was charged regardless of how many times the direct debit had already been returned unpaid;
- An excessive fee for cancelled direct debits which did not reflect administrative costs;
- An early repayment charge on mortgage balances which included arrears fees and charges within that balance.
The firm also failed to take reasonable care to organise and control its affairs responsibly and effectively, and to ensure adequate risk management systems. Its management information focused on the performance of the firm's mortgage book and the profitability of the business, rather than on treating customers fairly.
Kensington qualified for a 30% discount under the FSA's settlement discount scheme. Without the discount the fine would have been GBP1.75 million. The FSA has also taken into account that Kensington has made significant improvements to its arrears and repossession processes since the early part of 2008.
Margaret Cole, director of enforcement and financial crime, said:
"This case should serve as a strong reminder to firms dealing with retail customers, especially customers in a vulnerable position such as those with mortgage arrears, that the FSA will take robust action where it sees that customers are not treated fairly. Retail 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."
