Money News

The GMAC-RFC mortgage lender has been fined £2.8m by the Financial Services Authority (FSA) for mistreating customers who fell into arrears.

It has also been told to repay £7.7m, plus interest, to 46,000 of its borrowers.

The FSA said the company levied unfair charges on borrowers who fell behind with their repayments and was too eager to repossess them.

GMAC-RFC apologised and admitted some its charges had been excessive.

"In hindsight, we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required," said a spokesman for the lender.

"We will be writing to customers who incurred these specific charges when in arrears and will re-credit the charges plus interest," he added.

 

After setting up as a mortgage business in the UK in 1998, GMAC-RFC grew rapidly to become one of the UK's largest mortgage lenders, but it stopped making new loans last year.

The FSA's investigation of the company's lending practices between October 2004 and October 2008 found that:

* charges for dealing with people in arrears were "excessive and unfair"

* repossession proceedings were started before all other alternatives had been considered

* GMAC staff were not properly trained in dealing with arrears cases and repossessions.

Another three lenders are being investigated by the FSA over similar failings.

 

The consumers association Which? demanded they be identified.

"Instead of treating its customers in arrears fairly, GMAC decided to pile on the misery by squeezing more money out of them and, in some cases, taking their homes," said Which? personal finance campaigner, Dominic Lindley.

"This raises serious questions about the amount of time the enforcement process has taken, given that the FSA has known about these problems since mid 2008."

 

The fine is the largest yet to be levied by the FSA on a mortgage lender and the regulator warned that more may be in the pipeline.