GE Money fined £1.1m

Mortgage lender GE Money Home Lending has been fined £1.12 million for causing 684 borrowers to lose £2.3 million.

The Financial Services Authority (FSA) dished out the fine and said the mortgage borrowers affected have received full redress.

GE Money Home Lending admitted just a handful of borrowers are still to receive cash back.

The fine covers mortgage contract 'retention clauses' - a normal practice - whereby around £3,000 was held back from mortgage advances as a condition of the mortgage loan, normally where the borrower was required to carry out 'essential' repairs, such as damp or structural work.

However, under GE Money Home Lending conditions the cash was retained for six months – but borrowers were still charged interest on the full amount.

Furthermore, the money and interest earned on it in was not always returned.

When the mortgages were redeemed, the cash was not returned again – meaning borrowers overpaid for deals.

GE Money Home Lending was fined for both holding onto this money and not making is terms and conditions clear enough.

FSA director of enforcement Margaret Cole said: "The firm’s failings were serious because a large number of borrowers, including some with impaired or non-standard credit profiles, were put at risk of financial loss.

"The firm identified the systems and control failings in 2004, but despite internal recommendations that improvements be made, no corrective action was taken for more than two years.

"I emphasise that we expect high standards by lenders in their administration of their mortgage book."

A spokesperson for GE Money Home Lending said the firm was disappointed by the issue and fully accepted it was at fault.

Colin Shave, chief executive of GE Money Home Lending, said: "We regret the events which led to this situation and, although the number of affected borrowers was small compared to our overall customer base, we sincerely apologise to those who were affected."

The full fine would have been £1.6 million, but the firm made an early settlement.

It would have been even higher except for the fact GE Money Home Lending reported the problem and had provided compensation to affected borrowers.

In total 5,245 customers have received redress of £7.04 million.