Together Personal Finance Limited

FCA action

fine

1

in fines

£1.25m

most recent

December 2012

• Fined £1.25m on 10 December 2012

  On 6 December 2012 the FSA imposed a financial penalty on Cheshire Mortgage Corporation Limited (CMCL) of £1.255 million for breaching Principles 3, 6 and 7 of the FSA's Principles for Businesses and for breaching section 59 of the Financial Services and Markets Act 2000 (the Act). CMCL agreed to settle at an early stage of the FSA's investigation and therefore qualified for a 30% (stage 1) discount under the FSA's executive settlement procedures. Were it not for this discount, the FSA would have imposed a financial penalty of £1.75 million on CMCL. CMCL is a small mortgage lender that operates in niche market sectors, previously including lending to the impaired credit market. CMCL is part of a group of companies (the Group) and is the only regulated entity in the Group. The FSA has found that during the period 31 October 2004 to 31 December 2009 (the Relevant Period) CMCL could not always demonstrate that it had taken sufficient steps to ensure that all loans were affordable for customers, sometimes treated customers unfairly when they fell into arrears and did not always communicate regularly or accurately with customers. On lending practices, CMCL: i. could not always demonstrate that it had taken sufficient steps to ensure that loans were affordable for customers or that all the supporting documentation provided by the customer was always sufficiently evidenced to ensure it was reliable; ii. did not always adequately test the plausibility of the information provided by customers applying for self-certified mortgages; iii. had Underwriting Guidelines and a Responsible Lending Policy in place but did not always follow them as a senior director of the Group and the CEO would on limited occasions be involved in the underwriting process and, on occasion, waive standard requirements; and iv. did not have adequate compliance systems and controls in place to identify the issues raised above and rectify them. On treatment of customers in arrears, CMCL: i. operated a bonus system to motivate staff to collect cash from customers in arrears; ii. did not always take reasonable steps to reach agreement with customers in arrears over payment arrangements or inform them of the range of options available to them; iii. allowed an incorrect impression that an account of a customer in arrears had been transferred to a third party debt recovery agent when it was referred to a different company within the Group (as opposed to outsourcing the debt recovery), and charged £150 (a fee which would have been charged by an outsourced firm) for this action; iv. set-up informal payment plans with customers in arrears with, in certain cases, either no assessment or an inadequate assessment of whether they were affordable or sustainable; v. set-up visits by debt collection agents for which there was a charge and failed to send a letter giving customers the opportunity to cancel the visit and therefore avoid the charges; vi. failed to carry out any formal calculation to justify the level of their arrears handling charges and to ensure that charges were representative of their administration costs; vii. failed to ensure that arrears handling charges were always correctly and consistently applied; viii. did not collect sufficient Management Information to demonstrate that it was treating customers fairly or that would have enabled it to assess whether there was any link between underwriting decisions and customers falling into early arrears; and ix.failed to communicate regularly or fully with customers in arrears or complainants. CMCL also contravened section 59 of the Act by failing to take reasonable care to ensure that no person performed a controlled function in relation to its regulated activities without FSA approval.