MORTGAGE lender GMAC-RFC must pay out over £10 million in fines and compensation after being found guilty of unfair treatment of customers in arrears.
The Financial Services Authority (FSA) yesterday fined the lender £2.8m and told it to pay up to £7.7m in customer compensation as a result of "serious failings" between October 2004 and November 2008.
The fine would have reached £4m had the fir
m not qualified for a 30 per cent early settlement discount.
The FSA said the firm, which specialised in buy-to-let and subprime mortgages, had levied excessive and unfair charges on customers that did not reflect administration costs and proposed repayment plans that did not always consider a customer's individual circumstances. It also issued repossession proceedings before fully considering all the alternatives.
About 46,000 customers were charged a monthly non-payment fee of £15 while they were in arrears, said the FSA, while up to 27,811 borrowers who redeemed their mortgage found their early repayment fee had been applied to both the arrears charges and the loan value.
GMAC-RFC, which ceased offering new home loans in May 2008, was also found guilty of unfair solicitor instruction fees, found to be £39 above the actual cost for over 41,000 mortgage accounts.
Margaret Cole, director of enforcement and financial crime at the FSA, claimed the case was an example of how the regulator's more intrusive approach would benefit consumers.
But Dominic Lindley, personal finance campaigner at consumer group Which?, said that for many GMAC customers, the FSA's action had come too late.
"This raises serious questions about the amount of time the enforcement process has taken, given that the FSA has known about these problems since mid 2008," said Lindley.
