Terming Deutsche Bank’s mortgage practice ‘irresponsible’, the Financial Services Authority (FSA) has – for the first time in history, imposed fines on the banking group.
The FSA has ordered Deutsche bank to pay £1.5 million in compensation to nearly 8,000 borrowers apart from a fine of £840,000.
The bank has been accused of “irresponsible lending practices and unfair treatment of customers in arrears” by the regulator.
Giving out the details, FSA said the bank’s staff
- failed to advise customers of cheaper mortgages who had requested for self-certified loans
- Did not confirm if some of the customers will be able to afford their mortgages if it extended into their retirement.
- Failed to confirm if the customers have alternate places to live if they decided to sell their properties to pay off their interest only mortgages.
The bank had also sold mortgages to people with poor credit history through brokers in 2006 and 2007.
The bank had approved 7,967 mortgages during the period out of which 4,211 still remains on its balance sheet.
FSA’s investigation also found that the bank had levied unfair charges to its customers when some of them fell behind their payment schedules.
“This is the first time that we have taken enforcement action against a firm for irresponsible mortgage lending”, said Margaret Cole, Director of enforcement at FSA.
“Firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged by their failings”, she went on to add.
Reacting to the news, Deutsche Bank said: “Following the identification of the issues raised by the FSA in an industry-wide review started in 2008, DB mortgages immediately commissioned a third-party review into its lending and arrears collection processes”.
Following the review, “As a consequence, DB mortgages has improved its oversight of mortgage servicing activities”, it said in a statement.
FSA has fined four companies since the autumn of 2009 for mistreating mortgage customers in arrears.