Mortgage firm falls foul Of FSA

The Financial Services Authority (FSA) has fined a mortgage firm and its management for payment protection insurance failings.

Hadenglen Home Finance of Ashby de la Zouch, Leicestershire were fined £133,000 and chief executive Richard Hayes was fined £49,000 after selling potentially unsuitable remortgages or payment protection insurance (PPI) to nearly 4,000 clients. The FSA said that its customers had been exposed to an ‘unacceptably high risk’ of being mis-sold the insurance.

The watchdog appears to be sending a firm message to companies who look to be cashing in on the confusion of some customers surrounding their policies. It is the first time that both a firm and its boss has been fined in this way.

Hadenglen were found by the FSA to have exposed around 2,000 re-mortgage and 1,900 PPI customers to a high risk of being sold an unsuitable product. Mr Hayes was found to be responsible for the business practices of the firm and for making sure that the systems and controls in place were appropriate for selling re-mortgages and PPI. Sales practices for PPI were not found to be adequate, and the sales strategy for re-mortgages put customers at risk of paying fees and early redemption charges that were unsuitable.

Margaret Cole, FSA Director of Enforcement, said: “Firms must develop and maintain systems and controls that minimise the risk of providing unsuitable advice to customers. The penalty imposed on Mr Hayes should leave senior management within firms in no doubt that the FSA will hold them to account if they fail to treat their customers fairly. PPI has been a priority for the FSA since general insurance regulation began and it continues to be a priority for us. This is the first time we have taken action against a chief executive for PPI selling failures. The significant fines imposed on both Hadenglen and Mr Hayes reflect the seriousness of their actions.”

It is reported that Hadenglen have now implemented a remedial action plan without which the fines would have been significantly higher.