The Financial Services Authority UK (FSA) has fined GE Money Home Lending £1.12 million for systems and controls failings that resulted in GE Money not complying with the loan agreement, resulting in 684 borrowers suffering a total financial loss in excess of £2.3 million.
The customers affected were those whose loan contracts were subject to a "retention" clause whereby a sum of around £3,000 was withheld from the mortgage advance as a condition of the loan – typically where the borrower was required to carry out specified repairs to the mortgaged property. GE Money’s loan terms and conditions provided that these retention monies would be retained for six months and that during this time the borrower would be charged interest on the full mortgage loan including the retention monies. After six months the retention monies and accumulated interest should have been released to the borrower or applied to reduce the outstanding mortgage loan.
The firm’s terms and conditions did not make it clear to all customers that they would be charged interest on the full mortgage loan, including the retention monies, during the six month retention period.
Due to inadequate systems and procedures at GE Money, retention monies and accumulated interest were not always paid to borrowers or applied to their outstanding mortgage loan after six months and GE Money continued to charge some borrowers interest on retention monies beyond the six month retention period. When a mortgage with an outstanding retention was redeemed, GE money did not always deduct the retention monies and accumulated interest from the outstanding mortgage loan. This resulted in some borrowers overpaying GE Money when redeeming their mortgage.