The Financial Services Authority (FSA) has fined Cheadle-based mortgage lender, Cheshire Mortgage Corporation Limited (CMCL), £1.225m for failing to treat customers fairly in the sale of mortgages and arrears handling from October 2004 to the end of 2009.

The CEO of CMCL, Henry Moser, has been fined £70,000 and agreed to step down from his role within three to six months. Andrew Lawton, the firm’s compliance director, has been fined £13,500 and banned from holding a significant influence function.

The FSA has also required CMCL to carry out a redress exercise that could see approximately £2m paid to around 2,000 affected customers.

CMCL operated in niche markets, including lending to customers with poor credit histories. The FSA found that CMCL failed to treat some of its customers fairly when they fell into arrears, was unable to always demonstrate that mortgages it sold were affordable, and did not always communicate regularly or fully with its customers.

Moser has been disciplined for failing to spot these problems and put them right.

CMCL overcharged some customers in arrears and applied arrears charges inconsistently and unfairly. Customers were also sometimes notified of charges after they had been incurred.

The FSA also found that:
• when CMCL transferred customers in arrears to Monarch Recoveries for debt recovery, they were charged £150 despite it being an in-house company;
• CMCL did not always make a reasonable effort to reach an agreement with customers in arrears over method of payment; and
• CMCL did not always properly assess the affordability of mortgages by, for example, challenging a customer’s declared income.

Moser, as CEO, was ultimately responsible for the actions and compliance of the firm, however he failed to ensure the firm was being properly managed so problems would be identified and remedied. Lawton was aware of certain poor practices taking place at the firm but failed to put them right and demonstrated a lack of competence and capability in his role as a compliance director.

Tracey McDermott, director of enforcement and financial crime, said:
“CMCL’s lacklustre approach to regulation, combined with very poor practices in collecting arrears, meant that some customers already worried about being able to pay back their mortgages were put under undue pressure and sometimes ended up paying more than they should.

“The failings of Moser, Lawton and CMCL were serious and let down a vulnerable group of consumers. Where firms and individuals fail to comply with our rules and treat customers fairly they should expect to be held to account.”

CMCL and Moser both settled at an early stage of the investigation so qualified for a 30% discount, without which the fines would have been £1.75 m and £100,000 respectively. Lawton settled at a later stage of the investigation and qualified for a 10% discount, without which he would have been fined £15,000.