£1.12m Fine for Mortgage Lender

GE Money Home Lending has been fined £1.12m after failures resulted in hundreds of borrowers suffering losses of £2.3m. The Financial Services Authority (FSA) said the fine was the first of its kind regarding lending processes.

The watchdog said 684 customers with retention clauses in their contracts lost more than £3,000 on average.

GE Money Home Lending, the UK's 14th largest mortgage lender last year, imposed a clause that withheld part of these customers' mortgages for six months - typically so they could carry out specific repairs to the property.

It is standard practice among lenders that a small amount of the money due to a borrower when a mortgage is taken out can be held back until work is done to the property. But the FSA found that the firm did not make it clear to all customers that they would be charged interest on the full amount of the mortgage even though they had not received all of the loan. After six months, the money that had been held back, along with the accumulated interest, was not always paid to borrowers - and interest was still being charged on it.

It has paid back £7.04m, including compensation, to a total of 5,245 customers in relation to the issue.


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