The Financial Services Authority (FSA) has fined a sub-prime mortgage lender £1.23 million for imposing unfair charges on its customers. The charges related to fees for unpaid and cancelled direct debits and early repayment of loans. Staff members within The Kensington Mortgage Company were also found to have made profitability a priority over fairness to customers. In particular, the company’s focus was on getting customers to repay arrears quickly rather than taking their circumstances and ability to pay into account.
The company has pledged to compensate the estimated 16,000 customers affected by the unfair charges, at a further cost of more than £1 million. The case highlights the need for companies that deal with vulnerable and high risk consumers to act fairly at all times, or face FSA intervention and severe financial penalties. Any charges levied on customers must accurately reflect the extra work and cost incurred by the lender.
The Kensington Mortgage Company was one of the first sub-prime mortgage lenders in the UK. They offered self-certification and sub-prime mortgages when the property market was reaching its peak. Their success prompted others, such as Northern Rock, to enter the high-risk marketplace. Since the property slump at the end of 2007, Kensington has focused on lower risk lending, although it has recently introduced a loan product for individuals with county court judgments.
The case highlights the fact that companies that deal with consumers must consider their customers’ best interests rather than acting in a purely commercial capacity. The FSA has issued guidance on treating customers fairly to help companies meet these requirements.
If you are having difficulty in managing your debt repayments, take advice sooner rather than later.