The sub-prime mortgage company GMAC yesterday became the first victim of the Financial Services Authority's "get tough" policy on specialist lenders when it was hit with a £2.8m fine for mistreating customers.
Amid rising complaints about the behaviour of the mortgage companies, the FSA said the American-owned GMAC had also agreed to pay £7.7m in compensation to 46,000 customers.
In a clear warning to GMAC's rivals, the regulator said the case had "set a precedent" and the fine would have been £4m had GMAC not agreed to settle early. The FSA said GMAC was penalised for its treatment of customers who had fallen behind on mortgage repayments, or were going through repossession.
About 46,000 policyholders who were charged "specific excessive and unfair charges" between November 2004 and the end of August this year will receive letters from the lender offering them compensation. GMAC withdrew from the mortgage market in May last year but still has many borrowers on its books.
The FSA concluded that GMAC's unfair fees did not reflect administration costs, its repayment plans did not always consider a customer's circumstances and it often began repossession proceedings "before fully considering all the alternatives". In its final notice, the FSA said GMAC had tried to collect arrears over short periods of time within fixed mandates, and some clients received letters about their outstanding mortgages that were "factually inacurate".
Margaret Cole, the FSA's director of enforcement, said: "This case shows credible deterrence in action."Reuse content