The regulator found that 684 borrowers who took out GEMHL mortgages including retention clauses suffered losses totalling £2.3m before redress.
The fine comes on the back of GEMHL increasing its mortgage rates and fees. Some fear the latest problem could be the final straw.
One source says: “I can’t imagine this will endear the GEMHL brand to the boys back in the US. On top of funding worries, it could diminish their appetite further.”
But a spokesman for GEMHL says: “GE US has known about this since the beginning and we have kept it updated. We remain committed to the UK market.”
There was more bad news for GE last week after it cut its earnings forecast in the US. Its Q3 2008 profits are now expected to be 43 to 48 cents per share, down from the previous forecast of 50 to 54.