The FSA has fined DB Mortgages, part of the Deutsche Bank Group, £840,000 for irresponsible lending practices and unfair treatment of customers in arrears, and secured £1.5m in redress for customers.
The firm failed to show customers whether they could afford mortgages sold where the term continued after their retirement and failed to consider whether there were cheaper mortgages available for customers seeking self-certified mortgages.
It also failed to ensure customers had thought about where they would live at the end of the term if they needed to sell their house to pay off an interest-only mortgage.
On treatment of customers in arrears, DB Mortgages did not consider customers' individual circumstances or tell them about the range of options that were available to them, and applied charges which were unfair because they were charged repeatedly or did not accurately reflect the cost of administering an account in arrears.
Margaret Cole, the FSA's managing director of enforcement and financial crime, says: "This is the first time that we have taken enforcement action against a firm for irresponsible mortgage lending. Firms need to understand that we will not tolerate lax lending practices and unfair treatment of customers in arrears.
"Firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged by their failings."
The FSA took into account that DB Mortgages worked in an open and co-operative way with the regulator and has made significant improvements to its arrears handling procedures.
As a result of early settlement, the firm also qualified for a 30% discount under the FSA's settlement discount scheme, without which the fine would have been £1.2m.
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