The Financial Services Authority (FSA) has set a precedent by fining the mortgage lending company GMAC-RFC, which no longer takes on new business in the UK, Â£2.8 million for treating some of its customers unfairly. GMAC also had to repay Â£7.7 million to the customers concerned.
The customers were those that fell into arrears on their home-loans and the cause of the unfairness was due in part to the monthly fee of Â£45 that was charged on overdue accounts. The FSA decided that this was unfair as it was disproportionate to the actual cost of processing to the lender.
The administration of the GMAC mortgage book was outsourced to Homeloan Management Ltd (HML), a subsidiary of the Skipton Group who uses a standardised format for dealing with those in arrears. HML also manages loan books for many other lenders and applies that same format to other mortgage holders who are in arrears. This could mean that there are vast numbers of borrowers out there who could claim against HML as well as any other lender/administrator who uses this model of charging.
This is almost a mirror of the bank and credit card charges fiasco except that the FSA acted and got a result but with the banks and credit card companies the Office of Fair Trading (OFT) missed the open goal. I can see many parallels between the two but no joined up thinking. The OFT were robbed of a result at the last minute by a legal technicality that they should arguably have spotted. But why the difference between the two cases? Is it than one group are lovely home-owners and the other group are dirty credit card defaulters?
There will no doubt be an industry forming around reclaiming mortgage arrears fees over the coming few weeks, if one isn't already out there.
The overall majority of those in mortgage arrears will probably also have unsecured lending problems too. It is strange that they can rely on one regulator to force lenders to act properly, but not in the other. Especially when you consider that the unsecured credit charges could well have exacerbated the position with respect to their mortgage payments situation.
A borrower is a borrower and should be treated fairly whatever the loan was for and whoever the regulator is.