The Financial Services Authority has slapped a £630,000 fine on Swift 1st after discovering the sub-prime lender has unfairly treated around 2,500 of its customers.
The lender has also been ordered to redress customers, which could cost it around £2.35m.
Mortgage Strategy revealed Swift was being investigated in December 2010, after its accounts showed that it had set aside £9.4m to cover any potential FSA fine and redress.
The regulator identified serious failings by Swift that occurred between June 2007 and July 2009.
It found the Essex-based lender applied charges to accounts in arrears which were excessive in that they did not reflect a reasonable estimate of the cost of administering an account in arrears.
Swift also failed to have adequate controls in place to deal with early redemptions which resulted in some clients who redeemed their mortgages overpaying.
Tracey McDermott, acting director of enforcement and financial crime at the FSA, says: “Many of Swift’s customers were already in a vulnerable position, having fallen into arrears on their mortgage payments, and they could ill-afford excessive and unfair fees.”
A spokesman for Swift says the lender is focussed on repaying customers as quickly as possible.
He says: “We are committed to ensuring we treat our customers in a fair and transparent way.
“We have invested significantly in our staff, systems and processes and are confident of our ability to deliver a good service to our customers both now and in the future.”