by Mark Johnston
The Financial Services Authority Fines at a High!
The Financial Service Authority (FSA) handed out just over £66 million in fines last year, this was the second highest total in its history behind 2010’s £89 million.
However, according to law firm Reynolds Porter Chamberlain (RPC) the regulator has handed down a record £312 million in fines this year, the fines have smashed the previous record of £89 million, set in 2010, beating it by 251 per cent.
The watchdog has ramped up penalties since the start of the financial crisis after admitting it had been too soft. In 2007 it collected just £5.3 million but the figure climbed to £23 million in 2008 and £35 million in 2009.
Banks paid more than £160 million in compensation to customers last year after a crackdown by the financial regulator. However recent figures for 2012 reveal that more than £7.5 billion has already been paid out in redress by the banks to consumers so far.
The Financial Services Authority (FSA) most recent fined was to Cheadle based mortgage lender, Cheshire Mortgage Corporation Limited (CMCL). They were fined £1.225 million for failing to treat customers fairly in the sale of mortgages and arrears handling from October 2004 to the end of 2009.
The Cheshire Mortgage Corporation Limited (CMCL) operated in niche markets, including lending to customers with poor credit histories. The FSA found that mortgage lender failed to treat some of its customers fairly when they fell into arrears, they found they were unable to always demonstrate that the mortgages they sold were affordable, and also they did not always communicate regularly or fully with its customers.
Not only that but the Cheshire Mortgage Corporation Limited (CMCL) overcharged some customers in arrears and applied arrears charges inconsistently and unfairly. Customers were also sometimes notified of charges after they had been incurred.
Tracey McDermott, director of enforcement and financial crime for the Financial Services Authority (FSA), said: “Cheshire Mortgage Corporation Limited’s lacklustre approach to regulation, combined with very poor practices in collecting arrears, meant that some customers already worried about being able to pay back their mortgages were put under undue pressure and sometimes ended up paying more than they should”.
Therefore the Financial Services Authority (FSA) has also required the mortgage lender to carry out a redress exercise that could see approximately £2 million paid to around 2,000 affected customers.
In conclusion to this Cheshire Mortgage Corporation issued a lengthy statement, which concluded: “We sincerely apologise to any customers that may have been affected and have been actively contacting those customers to ensure that matters are appropriately addressed in a timely manner.”
Some experts feel that while there are important policy reasons for fines, especially after the serious failings of financial services businesses, it is important the new regulators do not get carried away and harm the competitiveness of the UK’s financial services sector.
Industry experts have already predicted that fines will continue to rocket next year as the regulator hands out yet more penalties for the London Interbank Offered Rate (LIBOR) scandal.
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