GE Money fined £1.12m for mismanaging mortgage accounts
Posted on: 25/09/2008
GE Money Home Lending has gained notoriety for being the first mortgage lender to be fined by the Financial Services Authority (FSA) because of inadequacies in its lending processes.
The firm has been fined £1.12 million for mismanaging customers’ mortgage accounts.
The mortgages in question contained “retention” clauses that allowed the lender to withhold a sum from the mortgage advance until certain conditions of the mortgage, such as repairs to the property, were fulfilled.
GE Money’s terms and conditions allowed the firm to charge interest on the sum retained for six months, after which the retention monies and accumulated interest should have been released to the borrower, or offset against the outstanding mortgage loan.
However, the FSA found that GE Money did not make it clear to all customers that they would be charged interest on the monies that were being retained.
Even worse, some customers were charged interest on retention monies for over six months and others never had the retention monies and accumulated interest deducted from their outstanding loans.
The FSA’s director of enforcement, Margaret Cole, says the firm’s failings were serious because a large number of borrowers were put at risk of financial loss.
In addition, GE Money identified the problems in 2004 but took no corrective action for over two years.