IFA Thinc fined £900,000 for sub prime mortgage oversights

16 May 2008 / by Rachael Stiles
Independent financial advisor firm Thinc has been ordered by the FSA to pay a fine of almost £1million as a result of failings concerning the selling of sub prime mortgages.

Thinc has been found guilty by the regulator of failing to check whether or not its clients could afford the repayments on sub prime mortgages; of selling them to people who did not need them and who were eligible for prime deals; of not demonstrating why these people's credit histories warranted a sub prime mortgage, and of not matching the mortgage to the needs of the customer.

The firm was visited by regulators in early 2007, which led to some changes, but these efforts have been described as ineffectual and inadequate, and it has been found to have disregarded demands to keep better records and train staff.

While not accusing the firm of 'mis-selling' mortgages, the FSA has said that it failed to "take reasonable care to ensure that it had records to prove that advice it gave to customers in relation to the sale of sub prime mortgages was suitable."

The £900,000 fine is the highest of its kind in this area of the market. As part of a shake-up of the sub prime mortgage sector, the FSA identified serious problems across the market, which led to Next Generation Mortgages and The Loan Company being fined, and Homebuyer Securities and Aidan Mortgage Consultants being banned from selling mortgages.

Analysts have found that a number of IFAs have sold their practices as a result of increases in operating costs and tighter regulation of the sector. Thinc is owned by French insurance company Axa, which said that it would not be taking disciplinary action against the group's management on this occasion.

The regulation clampdown on the sub prime mortgage sector comes after warnings that the UK could be facing a similar sub prime crisis to that which has taken place in America.

Margaret Cole, director of enforcement at the FSA, said: "This case demonstrates the importance of firms being able to prove to themselves and to the FSA, through proper records, that they are treating their customers fairly by doing everything necessary to make sure that they get suitable advice.

"The level of fine shows that we are determined to impose higher fines for serious failings in the retail market and that poor record keeping is a serious failing even where, as in this case, the FSA has not determined that the firm mis-sold sub prime mortgages and there have been few complaints."

Thinc has provided a total of 18,015 mortgage contracts, representing £2,706million. The case was particularly serious because its misconduct could have has serious consequences on the customers concerned, the FSA said.

Meanwhile, Northern Rock boss Ron Sandler is also to face questions in court on Tuesday over the bank's rising number of customers in mortgage arrears, and concerns that it has an unfair advantage over its rivals as a result of being nationalised.

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