DB Mortgages, a sub-prime lender, has been fined £840,000 and ordered to pay its customers £1.5million in compensation after failing to fairly treat its customers.
The FSA (Financial Services Authority) found a number of failings at the firm, who are part of the much larger Deutsche Bank Group.
It is the first time the FSA have ever taken enforcement action against a firm for irresponsible mortgage lending, but it won’t be the last.
The mortgage company had failed to show that customers could afford mortgages after their retirement, and they had also failed to consider whether cheaper loans may have been available to those taking out self-certification mortgages.
DB Mortgages were also condoned for failing to suggest customers thought about where they would live at the end of their mortgage term, if they had to sell their house following an interest only mortgage.
Customers who went into arrears with the firm were also treated badly.
The FSAs Managing Director of enforcement and financial crime, Margaret Cole said, “This is the first time that we have taken enforcement action against a firm for irresponsible mortgage lending.
“Firms need to understand that we will not tolerate lax lending practices and unfair treatment of customers in arrears.
“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.”
DB Mortgages received a 30% reprieve for cooperating with the investigation, and for the subsequent improvements. Their fine would have been £1.2million if they hadn’t.