Kensington fined by FSA

Nia Williams

April 12, 2010

The firm has agreed to redress customers who were in arrears and charged specific unfair and/or excessive charges. It is estimated that the redress will cost the firm up to £1.066 million.

The FSA has identified a number of serious failings by Kensington which occurred between 1 January 2007 and 31 October 2008 in relation to its mortgage arrears handling processes and in its dealings with customers in arrears.

These include:

• Failing to ensure mortgage servicing staff acting on its behalf had adequate understanding of treating mortgage arrears customers fairly;

• Concentrating on the repayment of mortgage arrears over a short period of time rather than agreeing an arrangement to pay the arrears based on the customer’s individual circumstances;

• Applying three charges to customers’ accounts that were unfair and/or excessive. These were:

o A fee for a returned direct debit which was charged regardless of how many times the direct debit had already been returned unpaid;

o An excessive fee for cancelled direct debits which did not reflect administrative costs;

o An early repayment charge on mortgage balances which included arrears fees and charges within that balance.

The firm was also found to have failed to take reasonable care to organise and control its affairs responsibly and effectively, and to ensure adequate risk management systems. Its management information focused on the performance of the firm’s mortgage book and the profitability of the business, rather than on treating customers fairly.

Kensington qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £1.75 million. The FSA has also taken into account that Kensington has made significant improvements to its arrears and repossession processes since the early part of 2008.

Margaret Cole, director of enforcement and financial crime, said: “This case should serve as a strong reminder to firms dealing with retail customers, especially customers in a vulnerable position such as those with mortgage arrears, that the FSA will take robust action where it sees that customers are not treated fairly. Retail firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged.”

Commenting, Kensington said: “We apologise to all those customers who were impacted during this period and we are working to redress those customers affected as quickly as possible.

“This was a retrospective investigation into arrears processes and our charges were in line with the market at the time. However, we acknowledge that there were certain fees where it was felt that the charge did not accurately reflect the additional work and cost incurred by Kensington. We no longer charge these fees and will be writing to customers who have been affected.”

Details of the fees to be redressed are as follows:

• A proportion of the charge for cancellation of monthly mortgage payment by Direct Debit when in arrears (average refund £8.75)

• Charge for administration of more than 3 consecutive returned Direct Debits when in arrears (average refund £25)

• Early Repayment Charges applied to arrears fees and charges as part of the total balance (average refund £37)

Any of your clients who think they may be due redress do not need to take any action now, as Kensington will be contacting those customers who have been affected by 31st May.

The lender will also be publishing comprehensive information for customers and details of its dedicated helpline, which will be available shortly, on its website at

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