The firm has also agreed to carry out a programme to provide redress to customers who were in arrears and who were charged certain arrears fees and charges that were excessive.
Swift will provide redress to customers who redeemed their mortgages early where it miscalculated the interest on the redemption balance. It is estimated that the total cost of the redress to customers will be approximately £2.35m.
The FSA has identified a number of serious failings by Swift which occurred between June 2007 and July 2009 in relation to its arrears fees and charges and in its dealings with customers in arrears.
Swift applied certain charges to its customers’ accounts that were in arrears which were excessive in that they did not reflect a reasonable estimate of the cost of administering an account in arrears.
Arrears management fee: a monthly management fee applied to a customer in arrears:
- Default notice fee: a default fee applied when a customer’s account fell into arrears
- Unpaid mortgage payment fee: applied when a cheque, direct debit or standing order was not honoured by a customer’s bank and
- Litigation fees: fees applied to customers’ accounts when Swift started legal proceedings.
Swift applied excessive early repayment charges to the redemption figures of customers who were, or had been, in arrears;
- Swift failed to send all its customers in arrears certain prescribed documents, providing information on the options available to them;
- Swift focussed on the collection of arrears without always proactively engaging with customers to establish an appropriate ’arrangement to pay’ based on their individual circumstances; and
- Swift also failed to have adequate systems and controls in place to deal with early redemptions which resulted in some customers who redeemed their mortgages overpaying.
The FSA considers that Swift’s failings are serious as under FSA rules, a firm must consider the interests of its customers and ensure that they are treated fairly. Swift’s failings continued over a significant period of time and impacted about 2,500 customers. As Swift specialised in the sub-prime sector, a number of customers who already had an adverse credit status were put at further risk of financial detriment.
Tracey McDermott, acting director of enforcement and financial crime, says: “Firms must ensure they treat their customers fairly. 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.
“The FSA will take robust action to ensure not only that firms are fined for such failings but also that they identify and compensate customers who have been disadvantaged. The costs of doing so are often much more than the fine.”
Swift reported its failings in relation to early repayment charges and redemption balances to the FSA.
Swift also agreed to settle at an early stage and therefore qualified for a 30% reduction in penalty. Were it not for this discount the FSA would have imposed a financial penalty of £900,000.