A sub-prime mortgage company has been hit with a whopping £630,000 fine by the City watchdog for treating customers in arrears unfairly.
Redstone Mortgages Limited overcharged customers a combined £500,000 in arrears fees between January 2007 and August 2009 and must pay that sum in addition to the fine.
The Financial Services Authority (FSA), which issued the punishment, says borrowers hit with excessive arrears charges will be contacted by the firm to offer compensation.
Redstone also demanded cash to cut customers' arrears without considering their financial state and wrote "repetitive, excessive and confusing" letters.
Redstone, which is not a lender, bought large swathes of mortgages from specialist lenders that mainly sold loans to those with poor credit histories or homeowners who could not prove their income.
Those whose loans were bought, now owe Redstone the money, not their original lender.
Redstone compensation
The regulator has identified four types of excessive charges. Redstone is currently sifting through customer records to determine who has been overcharged. When that process is complete, it will write to customers offering redress, though the FSA warns that could take months.
The unfair fees were:
- Charging for failed direct debits each time it attempted to take payment, even when this happened multiple times within a short time.
- Including arrears charges in the balance on which an early repayment charge (ERC, which is a percentage of the outstanding balance) was calculated.
- Charging for debt counsellor visits when the customer was not given an appointment time or was not told of their right to cancel.
- A solicitor's fee, applied when Redstone unnecessarily instructed lawyers.
The FSA, which does not have a breakdown of the average amount charged to individual borrowers, says homeowners will know if they're a Redstone customer if the name appears on their mortgage statement.
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You could be able to claim compensation for a mis-sold mortgage click here for more details.
