The Derbyshire-based mortgage broker also failed to communicate accurate information about mortgage charges to its customers.
Jonathan Phelan, head of retail enforcement at the FSA, says: “AFS’s failings were serious because its sales process enabled vulnerable customers to apply for mortgage contracts that they could not necessarily afford.
“In giving the mortgage advice, AFS also failed to provide customers with accurate information about the mortgage contracts. The firm’s customer base is largely sub-prime and many of them were seeking to remortgage to consolidate existing debts.”
He says that behind AFS’s poor compliance regime the FSA found that in all the sales files it reviewed customers had provided AFS with false income and employment information.
The FSA found that AFS did not disclose information from fact finds on mortgage application forms submitted to lenders and that it did not have in place adequate systems to monitor the quality of advice provided by individual advisers.
AFS failed to provide its customers with adequate suitability letters and could not demonstrate from its client files the suitability of recommended mortgage contracts.
The FSA also found AFS did not disclose the correct proc fees to customers and in a number of cases self-cert mortgages were recommended despite the fact that a standard high street mortgage contract was clearly more suitable.
The regulator says AFS co-operated fully throughout the investigation and has been proactive in taking steps to remedy identified deficiencies and improve the resourcing and quality of its compliance function.
Even though AFS may have made unsuitable recommendations to customers, a past business review was not considered appropriate in this case because many of the customers had given false information about themselves.
AFS agreed to settle at an early stage of the FSA’s investigation and therefore qualified for a 30% discount under the FSA’s executive settlement procedure.
Were it not for this reduction, the FSA would have imposed a financial penalty of £90,000.