Mortgage broker fined £900,000 for sub-prime sales
A large firm of financial advisers has been fined £900,000 by the financial regulator for the way it sold sub-prime mortgages to its customers.
The Financial Services Authority (FSA) fined the Thinc Group and two of its associated companies for failing to keep records to prove that the sub-prime mortgages sold to customers were suitable.
The Thinc Group – a network of IFAs selling a range of financial products including mortgages - is accused of failing to collect adequate information on its clients before selling them sub-prime mortgages, and for being unable to prove whether a sub-prime mortgage was suitable for these customers.
It was also unable to demonstrate to the FSA whether customers were sub-prime or not, whether they could afford a sub-prime mortgage and why particular products had been recommended.
Although there is no evidence sub-prime mortgages were mis-sold to customers, the FSA warns that the firm’s failing could have had an “adverse effect” on customers concerned.
The failings were found to have taken place between 1 January 2006 and 30 September 2007. During this period, the Thinc Group sold 18,015 mortgages, of which 775 were sub-prime, worth a collective £2,706 million.
John Simmonds, chief executive of Thinc, says, “We sincerely regret the shortcomings that have been identified with regard to record keeping processes relating to a small number of sub-prime mortgages.”
All sub-prime financial products are aimed at borrowers with patchy credit histories and the term typically refers to mortgage candidates, though any form of credit offered to people who have had problems with debt repayment is classed as sub-prime. Depending on the lender’s own criteria, sub-prime can apply to borrowers who have missed a few credit card or loan repayments to people who have major debt problems and county court judgments (CCJ) against their name. To reflect the extra risk in lending to people who have struggled in the past, rates on sub-prime deals are typically higher than for “prime” borrowers.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.