Simon Read: Lender's fine won't help its victims
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.A former top 10 lender was fined a massive £2.8m by the Financial Services Authority this week and is being forced to hand back £7.7m plus interest that it overcharged customers. The fine was for failing to treat 46,000 of its customers fairly. The lender? GMAC-RFC. If you haven't heard of them, that's hardly surprising as they heavily targeted the sub-prime and self-certified market. But the fine wasn't for encouraging struggling families to take on debts they couldn't afford, as you may have presumed. No, GMAC's crime was far worse.
The lender was fined for its poor treatment of its customers who got into difficulties. That is people who fell into arrears or even faced repossession. I have always been led to believe by lenders that they want to help struggling borrowers.
They tell me that as long as people in trouble communicate with their lender about their problems, they are happy to discuss options to help borrowers avoid defaulting on the mortgage and losing their home. Lenders say they are prepared to arrange payment holidays, or renegotiate a mortgage's length to make repayments more affordable, for instance.
Not so GMAC, it seems. Between 2004 and 2008 it dealt with its army of struggling borrowers by imposing excessive and unfair charges on them, according to the FSA. Not only that, the lender suggested repayment plans that did not always consider a customer's individual circumstances and so could prove to be totally inappropriate. There's more. Crucially, it issued repossession proceedings before fully considering all the alternatives, forcing misery on countless of families who may have been able to avoid losing their home.
I don't know about you, but I find the latter quite shocking. So does consumer group Which? Personal finance campaigner, Dominic Lindley, says: "Instead of treating its customers in arrears fairly, GMAC decided to pile on the misery by squeezing more money out of them and, in some cases, taking their homes. For those people, the FSA's action is too late."
Given that the period the fine covers to November 2008 is almost a year ago, it does suggest that, once again, the City watchdog has been a little slow in dealing with the problem.
I find particularly disgusting the mean-spirited nature of some of GMAC's excessive charging. It says people were overcharged an average £117 for non-payment of their monthly mortgage payment by direct debit when they were in arrears. An average £14 of extra early repayment charges were applied to arrears fees and charges. And, adding insult to injury to people threatened with repossession, the solicitors instruction fee, was on average £45 more than the actual cost.
The lender was clearly profiteering by preying on distressed and hard-up families who wouldn't have dared question the high or unnecessary charges. It's pleasing that the FSA has finally brought the firm to book, but it's dreadful that the move may well be far too late for some folk.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments