Between 31 October 2004 and 30 November 2008, a number of serious failings by GMAC-RFC were identified in relation to its dealings with customers experiencing arrears and repossessions. These include:
excessive and unfair charges for customers that did not reflect administration costs;
proposing repayment plans that did not always consider a customer's individual circumstances;
inadequate training of mortgage servicing staff in handling of arrears and repossessions; and
issuing repossession proceedings before fully considering all the alternatives.
The case sets a precedent, with the FSA concluding this investigation in a matter of weeks, and the firm working with the FSA to agree a process to enable customers to receive redress as quickly as possible.
As a result of early settlement, the firm qualified for a 30% discount under the FSA's settlement discount scheme. Without the discount the fine would have been £4million.
Margaret Cole, director of Enforcement and Financial Crime, said: "This case shows credible deterrence in action. It is an excellent example of what the FSA's more intrusive approach can achieve for consumers, and it reflects what we said in our Mortgage Market Review last week about unfair mortgage arrears charges. Mortgage lenders and third party administrators should read this final notice and the Mortgage Market Review and take action in the interests of their customers.
GMAC-RFC commented, "We want to apologise to customers affected. We have worked openly with the FSA to review and revise our procedures for managing accounts in arrears.
"We've been able to work quickly as a result of cooperation with the FSA and changes already made to our procedures and training programmes over the last eighteen months. Furthermore, we have established a customer contact and redress programme in relation to certain arrears charges.
"Whilst our arrears charges were in line with the market, in hindsight, we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required. We will be writing to customers who incurred these specific charges when in arrears and will re-credit the charges plus interest."
