Home Loans Firm Fined For Overcharging And Mistreating Customers

Fri, 06 Nov 2009

The Financial Services Authority (FSA) has handed out the largest ever mortgage-related fine to home loans provider GMAC-RFC for dealing unfairly with customers in arrears or going through repossession .

The lender, which is part of the international financial services group GMAC Financial Services, has been fined £2.8 million and ordered to repay £7.7 million in compensation to more than 46,000 customers.

The FSA said GMAC-RFC was penalised for its "excessive and unfair charges" that were levied on customers in arrears or whose homes were repossessed between November 2004 and the end of August this year.

Over 46,000 mortgage account holders were charged a £15 monthly direct debit fee to cover the loan company’s administration costs of payments, even though the borrowers were not making payments because they were in arrears .

The regulator concluded that the non-payment fee did not reflect the administration costs, its repayment plans that did not always consider a customer's circumstances, and repossession proceedings were often started without fully considering alternative measures. It also hit out at the GMAC’s inadequate training of staff.

The FSA said the case had "set a precedent" and warned that fines for other lenders could follow.

GMAC-RFC began offering mortgages in Britain in 1998, and by 2007 was ranked as the country's eleventh-biggest home loan provider .

The company, which focused on sub-prime and self-certification loans, pulled out of the mortgage market last year but continues to serve existing customers.
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