GE Money fined over £1 million

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GE Money fined over £1 million

The mortgage lender GE Money Home Lending, the trading name of GE Consumer Finance Group and GE Capital Bank Ltd, has been fined more than one million pounds by the Financial Services Authority (the FSA).

This came amid news that the troubled mortgage lender had failed to inform their clients of vital information which would affect the amount of interest that they would have to pay in the form of mortgage repayments.

Lenders can on occasions, when it becomes apparent during a mortgage survey, hold back a portion of the property loan until any vital required repairs are completed on the property in question. This is nothing new and GE Money Home Lending and its counterparts are well within their rights to do this as the property may not actually be worth the premium that home buyers are paying for them; more importantly, the properties may also not be worth the amount that the mortgage firm is lending on the property, until these repairs have been carried out.

GE Money Home Lending failed to inform its customers that, although they were holding back part of their mortgages until the repairs were carried out, the home buyers would still have to pay interest on that portion of their mortgages.

When GE Money Home Lending customers came to redeeming their mortgages, the retention charges and interest charges were not taken in to account and thus they made significant over payments.

The Financial Services Authority (the FSA) imposed a fine of £1.12 million on GE Money Home Lending. GE Money Home Lending admitted the fault and agreed to settle the dispute early in return for a 30 percent reduction on the fine imposed by the regulator.

The Financial Services Authority (The FSA) commented that although the mortgage lender, GE Money Home Lending, had identified the system problems which caused the failings, in the first instance, in 2004, they failed to report it to the regulator and take corrective action for a further two years. The mortgage lender eventually reported the matter to the Financial Services Authority in November 2006.

The Financial Services Authority’s (The FSA’s) Enforcement Director, Margret Cole commented that: "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."

Indeed the true effect of the failing by GE Money Home Lending has not yet been gauged; it would be particularly relevant to ascertain the true effect that the crisis had on those borrowers with non-standard credit profiles.

As well as having the fine imposed on it by the Financial Services Authority, GE Money has taken additional corrective action by:

  1. 1. Reporting the issue to the Financial Services Authority in the first place (although the response was protracted by 2 years).
  2. 2. Paying the fine and settling the dispute in a timely manner.
  3. 3. Repaying more than 5000 of its customers an average of £3000 back each; a total of over £7 million.
  4. 4. Reviewing the systems that caused the original problems.

GE Money Home Lending released a statement saying that its profits will $20 billion; which is over a 30 percent drop on the year before.

About GE Money Home Lending

GE Money Home Lending is a UK based financial services company providing products such as mortgages, loans, buy now pay later schemes, re-mortgages, credit cards and insurance. It also teams up with leading high street retailers in the UK to provide retailer branded credit cards and store cards.