Sub-prime lender fined £1.2m over unfair charges

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Sub-prime lender Kensington was today hit with a £1.23 million fine and ordered to return up to £1.07 million in unfair charges to customers.

The Financial Services Authority (FSA) found "a number of serious breaches" at the lender, with an estimated 16,000 customers affected.

Between January 2007 and October 2008, Kensington's staff failed to treat customers in arrears fairly and focused on getting back cash as quickly as possible rather than basing repayments on individual circumstances, the FSA said.

Kensington charged "excessive" fees for bounced direct debits regardless of how many times the payment had already been refused, and rolled up arrears fees and costs into early repayment charges, the watchdog added.

Customers charged for more than three bounced direct debits will receive an average of £25, with an average £37 returned for inflated early repayment charges.

The bank, which is owned by Investec, lends mainly to the self-employed as well as those with poor credit history.

The lender must refund the unfair charges applied all the way back to November 2004 by the end of July.

The company has however co-operated with the FSA's investigation, lowering its fine from a potential £1.75 million.

The watchdog said Kensington had also made "significant improvements" to arrears and repossession processes since early 2008.

Margaret Cole, the FSA's director of enforcement and financial crime, said: "This case should serve as a strong reminder to firms dealing with retail customers, especially customers in a vulnerable position such as those with mortgage arrears, that the FSA will take robust action where it sees that customers are not treated fairly."

The firm said: "We apologise to all those customers who were impacted during this period and we are working to redress those customers affected as quickly as possible."

In October 2009 the FSA fined lender GMAC-RFC £2.8 million for failing to treat customers fairly and forced it to repay £7.7 million in unfair charges to borrowers.