Mortgage Lender Fined £10.5 Million by the FSA

The Financial Services Authority (FSA) recently fined one of the largest lenders that came onto the UK mortgage market in 1998, GMAC-RFC, part of General Motors.
The lender was ordered to pay £7.7 million plus interest to its borrowers and a fine of £2.8 million for unfair treatment of 46,000 of borrowers in arrears.
According to the investigation carried out by the Financial Services Authority for 4 years (2004-2008), GMAC-RFC mistreated its customers who fell in arrears and practiced repossession too actively. To be precise, FSA findings say that lender’s charges were too “excessive and unfair”, while repossession proceedings were oftentimes launched before other alternatives had been examined. Moreover, GMAC-RFC staff lacked sufficient training for dealing with borrowers in arrears.
The lender’s management admitted that its practices were unfair. GMAC-RFC’s spokesman mentioned that certain fees and charges were, indeed, disproportional to borrowers’ arrears; he added that the bank will contact all borrowers who were mistreated to re-credit the charges plus interest.
British consumer group Which? was extremely critical about GMAC-RFC practices; Dominic Lindley, group’s personal finance campaigner, even said that the lender preferred to make profit at the expense of its borrowers in arrears instead of treating them fairly.
Which? also criticised the work of the Financial Services Authority, which knew about GMAC-RFC practices long ago,  but did not act until recently. The consumer group also demanded that the FSA reveals the names of 3 other lenders that are currently being investigated by the organisation over similar failings.
Let us remind that earlier this year, the Financial Services Authority has already faced criticism from Members of Parliament, who claimed that the body was too leisurely when enforcing its rules.