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FSA fines mortgage lender £1.2m as 2,000 customers compensated

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The Financial Services Authority (FSA) has fined mortgage lender Cheshire Mortgage Corporation £1.2m for failing to treat customers fairly when collecting arrears. The Cheadle-based company was forced to pay up £1.225m for failures across its mortgage sales and arrears processes and two directors have been banned. Cheshire’s chief executive Henry Moser has been fined £70,000 and has agreed to step down from his role within three to six months. Andrew Lawton, the firm’s compliance director, has been fined £13,500 and banned from holding a significant influence function. The FSA has also forced Cheshire to pay out around £2m to nearly 2,000 customers in compensation.


An investigation into the mortgage lender, which provided loans to customers with poor credit histories, found that when Cheshire transferred customers in arrears to Monarch Recoveries for debt recovery, they were charged £150. This charge was made despite the fact that Monarch Recoveries was despite an in-house company. The FSA also found that Cheshire did not always make a reasonable effort to reach an agreement with customers in arrears over methods of payment. The regulator also said that Cheshire did not always properly assess the affordability of mortgages by, for example, challenging a customer’s declared income.


These failures occurred in the sale of mortgages and arrears handling from October 2004 to the end of 2009. The FSA said the company failed to treat some of its customers fairly when they fell into arrears; was unable to always demonstrate that mortgages it sold were affordable; and did not always communicate properly with customers. Chief executive Moser has been “disciplined” for failing to spot these problems and put them right. The lender overcharged some customers in arrears and applied arrears charges inconsistently and unfairly. Customers were also sometimes notified of charges after they had been incurred. Moser, as chief executive, was ultimately responsible for the actions and compliance of the company, but he failed to ensure the firm was being properly managed so that problems would be identified and remedied.


Lawton was aware of certain poor practices taking place at the firm but failed to put them right and demonstrated a lack of competence and capability in his role as a compliance director. Tracey McDermott, director of enforcement at the FSA, said: “The company’s lacklustre approach to regulation, combined with very poor practices in collecting arrears, meant that some customers already worried about being able to pay back their mortgages were put under undue pressure, and sometimes ended up paying more than they should.


“The failings of Moser, Lawton and Cheshire Mortgage Corporation were serious and let down a vulnerable group of consumers. Where firms and individuals fail to comply with our rules and treat customers fairly they should expect to be held to account.”


Link: http://www.credittoday.co.uk/article/14657/online-news/fsa-fines-mortgage-lender-1.2m-as-2000-customers-compensated

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