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FSA fines former mortgage group directors for “serious” failings

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Three former directors of mortgage broker Black and White Group (B&W) have been fined by the regulator for failures related to the sale of mortgages and payment protection insurance (PPI). The Financial Services Authority (FSA) has take action against chairman Christopher Ollerenshaw and chief executive Thomas Reeh. Despite challenging the FSA’s decisions in the Upper Tribunal, it was agreed that fines should be imposed on both directors, although this was reduced to £100,000 (£50,000 after financial hardship) for Ollerenshaw and £75,000 (£10,000 after financial hardship) for Reeh.


The group, which went into liquidation in 2008, mainly advised and arranged mortgage contracts, with many of its customers considered ‘sub-prime’, meaning that they had low or impaired credit ratings. The regulatory body asked for both individuals to be banned but the Tribunal decided against imposing a ban on Reeh in light of “mitigating circumstances”.


B&W had a panel of over 20 mortgage lenders and claimed to consider all of them when advising on a mortgage but the FSA has revealed that Ollerenshaw and Reeh encouraged sales advisers to sell a particular lender’s mortgages regardless of whether their products were most suited to the customer’s needs. The firm was found to have had a £20m loan facility from that same lender. In 2007, when B&W had difficulty making repayments on the loan it offset outstanding repayments on this loan against commissions due from the increased mortgage business with the particular lender, the FSA said. Advisers were also under pressure to sell PPI to consumers. An incentive scheme at the group saw advisers earn more commission on the sale of single premium policies over regular premium policies.


Former chief operating officer Adrian Childs has also been banned from holding a senior position in regulated financial services on the basis that he did not understand, or take steps to understand, how to perform his role. He would have received a £50,000 fine but Childs was declared bankrupt in 2009. Tracey McDermott, director of enforcement and financial crime at the FSA, called their failings “serious” and said that the way in which they ran B&W led to customers being treated unfairly. She added:


“Both the incentive scheme and the culture at the firm encouraged staff to focus on sales rather than suitability.


“We expect firms to put customers at the heart of their business. Getting sales incentives right is critical to that. Firms that fail to do so can expect us to take action against them.”


Had the firm not gone into liquidation a few years ago, the FSA stated that it would have imposed a £2.2m fine on the group.


Link: http://www.credittoday.co.uk/article/14672/online-news/fsa-fines-former-mortgage-group-directors-for-serious-failings

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