On lending practices, DB Mortgages failed to show that customers could afford mortgages sold where the term continued after their retirement.
It also failed to consider whether there were cheaper mortgages available for customers seeking self-certified mortgages, and failed to ensure that customers had thought about where they would live at the end of the term if they needed to sell their house to pay off an interest-only mortgage.
On treatment of customers in arrears, DB Mortgages did not consider customers’ individual circumstances or tell them about the range of options that were available to them, and applied charges that were unfair because they were charged repeatedly or did not accurately reflect the cost of administering an account in arrears.
Margaret Cole, the FSA’s managing director of enforcement and financial crime, says:“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”.
The FSA has taken into account that DB Mortgages worked in an open and co-operative way with the FSA and has made significant improvements to its arrears handling procedures. As a result of early settlement, the firm also qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount, the fine would have been £1.2m.
DB mortgages was wound down in mid-2008 and no longer originates mortgages.
In a statement, DB Mortgages, says: “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.
“As a consequence, DB Mortgages has improved its oversight of mortgage servicing activities DB Mortgages is the fourth lender to settle with the FSA since 2009 as part of the regulator’s ongoing review of mortgage practices.”