The Financial Services Authority (FSA) has fined Hadenglen Home Finance Plc (Hadenglen) £133,000, and its chief executive £49,000, for inadequate systems and controls when recommending re-mortgages and Payment Protection Insurance (PPI) to customers. This is the first time the FSA has fined both a firm and its chief executive for re-mortgage and PPI failings.
The failings were discovered as a result of the FSA's second phase of PPI work in May 2006. The FSA found that Hadenglen exposed approximately 2,000 re-mortgage and 1,900 PPI customers to the unacceptably high risk of being sold a product which was not suitable.
Hadenglen's Chief Executive Richard Hayes was responsible for the firm's business practices and for ensuring that its systems and controls for selling re-mortgages and PPI were appropriate. He implemented a sales strategy for re-mortgages without regard to the risk that customers would have to pay an early redemption charge and other fees when re-mortgaging may have been unsuitable. Mr Hayes also failed to ensure that the sales practices for PPI were adequate. Hadenglen did not gather sufficient information from customers and did not take into account the cost of PPI when making a recommendation.
As a result re-mortgage customers incurred significant charges that may not have been in their best interests and PPI customers were advised to purchase a product that may not have been suitable for their needs or under which they were not able to claim.
Margaret Cole, FSA Director of Enforcement, says:
"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."
Hadenglen Home Finance plc is a mortgage broker based in Ashby de la Zouch, Leicestershire and Mr Hayes is the firm's Chief Executive.
The FSA has previously fined five firms over poor PPI selling practices – Regency Mortgage Corporation Limited £56,000 , Loans.co.uk £455,000, Redcats (Brands) Limited £270,000), GE Capital Bank £610,000 and Capital One Bank (Europe) Plc £175,000 and has imposed a public censure on Eastern Western Motor Group) and Cathedral Motor Company Limited. Two other cases have been concluded where problems relating to PPI also featured - Capital Mortgage Connections Limited Ltd £17,500 and Home and County Mortgages Limited £52,500
Other PPI enforcement investigations are underway.
The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
Insurance: News update: 10 Sep 2007