Mortgage lender fined £1.225m

Kensington is also facing costs of £1.066m after agreeing to redress customers who were in arrears and charged unfair or excessive arrears charges.

The FSA 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 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.

Margaret Cole, director of enforcement and financial crime at the FSA, 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."

Kensington was also penalised for 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.

The company was found to be applying three charges to customers’ accounts that were unfair and/or excessive. These included a fee for a returned direct debit which was charged regardless of how many times the direct debit had already been returned unpaid;

They also included an excessive fee for cancelled direct debits which did not reflect administrative costs; and 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 per cent discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £1.75m.

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.

Source: Credit Today