GMAC-RFC, Kensington & Redstone Breaches…But where is Capstone's Final Notice?
As evidenced by the SPML Tariff of fees charges and those of PML and SPPL Capstone’s charges are probably the highest in the industry.
Does Capstone skim off the top of these charges and declare the revenues derived as an income stream? Does it pass the entire income onto the OL? Much like your monthly payments, the ultimate destination of all this cash remains shrouded in secrecy. But we’ll leave to one side what happens to these charges and just concentrate on a comparison.
If the FSA has found in the cases of GMAC-RFC, Kensington and Redstone that particular charges (and / or conduct) is unfair, detrimental to TCF and therefore a breach of regulated status then the same MUST apply to the TPA and the OL Capstone and/or SPML/SPPL/PML…
REDSTONE: The Final Notice
1.1. The FSA gave Redstone Mortgages Limited (“Redstone”/”the Firm”) a Decision Notice on 8 July 2010 which notified the Firm that pursuant to section 206 of the Financial Services and Markets Act 2000 (“the Act”), the FSA had decided to impose a financial penalty of £630,000 on the Firm in respect of breaches of Principle 3 (Management and control) and Principle 6 (Customers’ interests) of the Principles for Businesses (“the Principles”) and Rules 12.3.1 R, 12.5.2 R and 13.3.1 R in the Mortgages and Home Finance: Conduct of Business sourcebook (“MCOB”) in the period between 1 January 2007 and 5 August 2009 (“the Relevant Period”).
2.2. The Firm breached Principle 3 during the Relevant Period in that it failed to take, with adequate risk management systems.
the Firm failed to obtain and/or review sufficient treating customers fairly (“TCF”) management information to assess the handling of mortgage arrears and mortgage litigation activities to ensure the fair treatment of customers;
failed to take reasonable steps to ensure that the mortgage arrears servicing staff acting on its behalf (“the mortgage servicing staff”) had an adequate understanding of and implemented the requirement to treat customers fairly in handling its mortgage arrears and mortgage litigation activities
2.3. Redstone breached Principle 6 during the Relevant Period in that it failed to pay due regard to the interests of its customers and treat them fairly. In particular, the following failings were identified in that Redstone:
did not properly assess whether a proposed “arrangement to pay” (“ATP”2) was sustainable or whether there were alternatives for resolving a customer’s arrears other than an ATP based on the customer’s personal and financial circumstances;
had a written policy of initiating mortgage litigation if the customer’s account was two months or more in arrears regardless of the customer’s personal and financial circumstances. The mortgage servicing staff therefore focussed on reducing arrears to less than two months as part of the negotiation to enter into an ATP and in some cases this resulted in unnecessary litigation costs being incurred by the customer;
3) had a written policy of applying for a Suspended Possession Order (“SPO”) to secure an ATP if the customer could not bring their arrears under two months. In some cases, this resulted in unnecessary litigation costs being incurred by the customer, even where the customer had proposed an ATP that was reasonable in light of their personal and financial circumstances;
(4) issued repetitive, excessive and sometimes confusing correspondence;
(5) failed to inform customers:
(a) of their right to refuse a field counsellor; and/or
(b) that a field counsellor had been instructed and/or to notify them of the date and time of a proposed field counsellor visit, thereby depriving customers of the opportunity to refuse or cancel the visit without charge; and
(6) applied certain charges that were unfair and/or excessive.
Redstone also breached MCOB 12.3.1 R, 12.5.2 R and 13.3.1 R in relation to the facts described at paragraph 2.3 above.
RELEVANT STATUTORY PROVISIONS
3.1. The FSA’s statutory objectives are set out in section 2(2) of the Act. The relevant objectives for the purpose of this case are maintaining market confidence and the protection of consumers.
3.2. Section 206 of the Act provides:
(1) If the Authority considers that an authorised person has contravened a requirement imposed on him by or under this Act, it may impose on him a penalty, in respect of the contravention, of such amount as it considers appropriate.
3.3. Redstone is an authorised person for the purposes of section 206 of the Act. A requirement imposed on a firm includes the Principles and Rules made under section 138 of the Act, which provides that the FSA may make such rules applying to authorised persons as appear to be necessary or expedient for the purposes of protecting the interests of consumers.
3.4. Principle 3 provides that:
A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
3.5. Principle 6 provides that:
A firm must pay due regard to the interests of its customers and treat them fairly.
3.7. MCOB 12.5.2 R provides that:
A firm must ensure that its charges to a customer in connection with the firm entering into, making a further advance or further release on, administering, arranging or advising on a regulated mortgage contract, home reversion plan or regulated sale and rent back agreement, or arranging or advising on a variation to the terms of a regulated mortgage contract, home reversion plan or regulated sale and rent back agreement are not excessive.
3.8. MCOB 13.3.1 R provides that:
(1) A firm must deal fairly with any customer who: (a) is in arrears on a regulated mortgage contract or home purchase plan; (b) has a sale shortfall; or (c) is otherwise in breach of a home purchase plan.
(2) A firm must put in place, and operate in accordance with, a written policy (agreed by its respective governing body) and procedures for complying with (1).
FACTS RELIED UPON
4.5. Redstone failed to implement and maintain adequate oversight of the mortgage servicing staff, and failed to ensure that the mortgage servicing staff had an adequate understanding of, and implemented, TCF.
4.6. Prior to April 2009, Redstone had insufficient oversight of training for the mortgage servicing staff and conducted insufficient compliance monitoring to ensure that this training resulted in appropriate TCF outcomes for customers. As a result, prior to April 2009, the mortgage servicing staff failed properly to consider and/or implement TCF requirements in relation to customers in arrears.
4.7. Redstone also failed to maintain sufficient oversight of the incentive structures in place in respect of the mortgage servicing staff. The mortgage servicing staff had call duration targets that impacted on their remuneration. These call duration targets were too short to enable staff both to meet their targets and to obtain enough information about customers’ personal and financial circumstances to discuss the options available to them in repaying their arrears. As a result, Redstone failed to treat its customers fairly as set out below.
4.8. The Firm received insufficient TCF management information to ensure its customers were being treated fairly in its handling of its mortgage arrears and mortgage litigation activities.
4.12. Before April 2009 the mortgage servicing staff were not required to, and did not, properly assess whether the customer’s offer of an ATP was sustainable.
4.13. Before April 2009, Redstone failed properly to assess whether, based on the customer’s personal and financial circumstances, there was a better alternative to an ATP for resolving their arrears.
Arrears handling – use of field counsellors
4.15. Customers were not always informed by Redstone when a field counsellor had been instructed. Customers were regularly sent standard letters stating ‘we may’ or ‘we will’ instruct a field counsellor, but often were not told that a counsellor had actually been instructed to attend their property or notified of the date and time of the appointment. These customers were therefore unaware of any right to refuse or cancel an inconvenient and/or unwanted visit and may have incurred charges that could have been avoided had they been properly informed of the scheduled visit.
Mortgage Litigation
The Firm had a written policy of initiating mortgage litigation if the customer’s account was two months or more in arrears regardless of the customer’s personal and financial circumstances. This policy led, in certain cases, to the Firm commencing mortgage litigation without giving adequate consideration to the most appropriate options for those customers and/or taking into account their personal and financial circumstances.
Further, Redstone’s written policy was to apply for an SPO to secure an ATP in all cases where the mortgage account was two months or more in arrears. In some cases this resulted in unnecessary litigation rather than trying to avoid mortgage litigation and its related costs altogether and reach a direct agreement with the customer for an ATP without an SPO.
Mortgage Litigation
The Firm had a written policy of initiating mortgage litigation if the customer’s account was two months or more in arrears regardless of the customer’s personal and financial circumstances. This policy led, in certain cases, to the Firm commencing mortgage litigation without giving adequate consideration to the most appropriate options for those customers and/or taking into account their personal and financial circumstances.
Further, Redstone’s written policy was to apply for an SPO to secure an ATP in all cases where the mortgage account was two months or more in arrears. In some cases this resulted in unnecessary litigation rather than trying to avoid mortgage litigation and its related costs altogether and reach a direct agreement with the customer for an ATP without an SPO.
Arrears charges
During the Relevant Period, Redstone imposed a number of excessive or unfair charges on customers in arrears.
The excessive or unfair charges imposed by Redstone were:
(1) a fee for a returned direct debit which was charged on each re-presentation of the direct debit by the Firm regardless of the number of times it had already been returned unpaid;
(2) the inclusion of arrears fees and charges in the balance which formed the basis of the calculation of the early repayment charge;
(3) field counsellor fees charged to customers who had not been properly informed of the timing of the scheduled counsellor visit and/or their right to refuse or cancel the visit and who either refused the visit or were not available when the counsellor visited;
(4) field counsellor fees charged in full to the customer due to an administrative error when the reduced rate cancellation fee should have been charged; and
(5) fees associated with litigation activities when Redstone unnecessarily secured an ATP by way of an SPO.
5.2. Principle 6 requires that a firm must pay due regard to the interests of its customers and treat them fairly. In doing so, firms should ensure that customers are treated fairly if they are in arrears with their mortgage by:
(1) being flexible in considering a customer’s personal and financial circumstances; and
(2) ensuring that court action for repossession is only used after all other reasonable attempts have been made to resolve the arrears situation.
OK. So that’s Redstone’s Final Notice. I’m sure all of us have been on the rough end of the prohibited breaches practiced by Redstone but perpetrated by Capstone. Let’s have a look at GMAC. I’ll try to keep this shorter as in the main it will again be breaches of Principles 3 & 6, breaches of MCOB & excessive/unfair charges.
THE PENALTY
1.1. The FSA gave GMAC-RFC Limited (“GMAC”/“the firm”) a Decision Notice on 26 October 2009 which notified the firm that pursuant to section 206 of the Financial Services and Markets Act 2000 (“the Act”), the FSA had decided to impose a financial penalty of £2.8 million on the firm. This penalty is imposed for breaches of Principle 3 (Management and control) and Principle 6 (Customers’ interests) of the Principles for Businesses (“the Principles”) and Rules 12.4.1 R and 13.3.1 R in the Mortgages and Home Finance: Conduct of Business sourcebook (“MCOB”) in the period between 31 October 2004 and 30 November 2008 (“the Relevant Period”).
2.2. The firm breached Principle 3 during the Relevant Period in that it failed to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. In particular, the following failings were identified in that GMAC:
(1) failed to ensure that mortgage servicing staff were given sufficient training in treating customers fairly (“TCF”); and
(2) before 2008, only obtained limited management information to assess the servicing of mortgage arrears and repossessions to ensure the fair treatment of customers.
22.3. The firm breached Principle 6 during the Relevant Period in that it failed to pay due regard to the interests of its customers and treat them fairly. In particular, the following failings were identified in that GMAC:
(1) failed to ensure that mortgage servicing staff had an adequate understanding of and implemented the requirement to treat customers fairly in handling its mortgage arrears and repossessions;
(2) until late 2008, focussed on the collection of payment of arrears over a short period of time within fixed mandates, rather than always establishing a suitable arrangement based on the customer’s individual circumstances;
(3) applied certain charges to a customer’s account that were unfair in that they did not accurately reflect the actual cost of administering an account in arrears;
(4) had not arrived at a cost-based approach to the calculation of its arrears charges and therefore could not be sure that they were reasonable compared to the actual cost incurred;
(5) caused some letters to be sent to customers that were either factually inaccurate or did not contain sufficient information to give customers a clear and accurate statement of their mortgage account; and
(6) sometimes issued proceedings for repossession before all alternatives to repossession had been considered and accordingly, did not always use litigation only as a last resort.
2.4. The firm also breached MCOB 12.4.1R and 13.3.1R in relation to the facts described at paragraph 2.3 above.
4.10. The thematic review identified that some letters were sent to customers that were misleading or did not accurately reflect the status of the mortgage account. Insufficient control or monitoring of these letters meant that letters were sent to customers that:
(1) in one instance, quoted two different arrears amounts in the same letter;
(2) continued to threaten legal action where there had been a decision to suspend the application for repossession;
(3) when letters before action were issued, demanded full repayment of arrears where there was no evidence that this was a demand that the customer could meet;
4.13. Applications for immediate repossession orders were frequently made by GMAC without evidence that all other viable options had been considered and that repossession was being used only as a last resort.
Arrears charges
GMAC imposed certain charges related to activities carried out whilst the customer was in arrears, in circumstances that resulted in the unfair treatment of customers.
These unfair charges were:
(1) charges for non-payment of the monthly mortgage payment by direct debit, when the account was in arrears and no monthly payment was being made;
(2) calculation and imposition of the Early Repayment Charge on mortgage balances which included arrears fees and charges within that balance; and
(3) the proportion of the solicitors’ instruction fee that exceeded the actual cost.
The above charges were unfair because they did not accurately reflect the additional administration work to the mortgage account caused by the fact that the customer was in arrears.
5.5. In addition, GMAC did not treat its customers fairly as a result of applying certain charges and fees to customers’ accounts that were unfair as they did not accurately reflect the additional cost of administering an account in arrears in breach of MCOB 12.4.1R and 13.3.1 R.
5.6. This resulted in some customers incurring excessive and unfair charges (i.e. charges that were not a reasonable estimate of the costs of the additional administration required as a result of the customer being in arrears) and accruing additional costs that could have been avoided had GMAC adopted a more flexible and fairer approach to arrears management tailored to the customer’s individual circumstances.
5.12.
The FSA considers GMAC’s failings to be serious because:
(1) the failings persisted over a significant period of time and impacted a large number of customers some of whom already had an adverse credit status;
(2) a portion of GMAC’s lending was to the sub-prime sector and arrears rates in this sector are higher than those in the rest of the mortgage market; and
(3) the FSA has published a considerable amount of material on the importance of regulated firms treating customers fairly (“TCF”) to communicate to firms the FSA’s expectations in relation to a firm’s obligation in respect of TCF.
FSA contacts
8.6. For more information concerning this matter generally, you should contact Suzanne Burt at the FSA (direct line: 020 7066 1062 /fax: 020 7066 1063).
Georgina Philippou
Project Sponsor FSA Enforcement and Financial Crime Division
So. That’s GMAC-RFC. I think it is very important we look beyond what charges were penalised and examine the principle and the law. Basically the FSA have brushed certain charges under the carpet simply by not addressing them. But this does not mean that those charges are fair. They can still be challenged. the key is: do such charges amount to a reasonable estimate of the costs of the additional administration required as a result of the customer being in arrears. The answer has to be a resounding - NO. THEY DO NOT. Now for Kensington.
2.3. Kensington breached Principle 6 during the Relevant Period in that it failed to pay due regard to the interests of certain of its customers and treat them fairly. In particular, the following failings were identified in that the Firm:
(1) failed to take reasonable steps to ensure that the mortgage servicing staff acting on its behalf had an adequate understanding of and implemented the requirement to treat customers fairly in handling its mortgage arrears and repossessions activities;
(2) focused on the collection of payment of arrears over a short period of time within fixed mandates, rather than establishing a suitable arrangement to pay based on the customer’s individual circumstances; and
(3) did not have an appropriate cost-based approach to the calculation of certain charges and applied three charges to customers’ accounts that were unfair and/or excessive.
2.4. Kensington also breached MCOB 12.3.1 R, 12.5.1 R and 13.3.1 R in relation to the facts described at paragraph 2.3 above.
2.5. As a result of the breaches of Principles 3 and 6, Kensington failed to treat some of its customers fairly.
2.6. Accordingly, the failings merit the imposition of a substantial financial penalty.
A firm must ensure that any regulated mortgage contract , home reversion plan or regulated sale and rent back agreement that it enters into does not impose, and cannot be used to impose, excessive charges upon a customer.
A firm must deal fairly with any customer who:
is in arrears on a regulated mortgage contract or home purchase plan; has a sale shortfall; or is otherwise in breach of a home purchase plan.
A firm must put in place, and operate in accordance with, a written policy (agreed by its respective governing body) and procedures for complying with (1)
In relation to Kensington’s Collection Policy Manual, the report concluded that there were some areas of the manual that did not fully comply with the requirements of MCOB:
(1) it did not contain a reference to liaising with a third party source of advice where the customer makes arrangements for this;
The report contained the following section on TCF:
“Everyone interviewed had an awareness of TCF. However, the call handlers’ ability to articulate what this meant within an arrears or repossessions environment was weak. Whilst it is acknowledged that call handlers operate within set mandates and procedures within which the fair treatment of customers is considered, a more detailed knowledge and understanding of how to apply TCF would be beneficial. This will enable call handlers to recognise when to refer customers whose circumstances may have TCF implications and fall outside of the established process.”
During the Relevant Period, Kensington’s own audits and reviews alerted it to failings relating to its arrears and repossessions activities, including deficiencies in the contents of its collections policy, its compliance monitoring and its implementation of TCF. The Firm failed to take adequate steps to act upon and/or remedy any of these failings in a sufficiently timely fashion.
it did not contain adequate reference to Kensington adopting a reasonable approach to the time over which a payment or sale shortfall should be repaid with particular regard to the need to establish where feasible, a payment plan which is practical in terms of the circumstances of the customer;
it did not contain reference to whether Kensington will grant a request from the customer to change the date or method of payment;
it did not contain reference to Kensington giving consideration, where no reasonable payment can be made, to the customer being allowed to remain in possession to effect a sale;
it did not contain reference to giving the customer a reasonable period of time to consider any proposals for arrangements to pay the payment or sale shortfall; and
the policy did not contain explicit references to how it ensured that customers in arrears or possession were treated fairly in practice, specifically that customers should be treated on an individual basis.
4.28 The above failings demonstrate that some mortgage servicing staff acting on behalf of Kensington had an inadequate understanding of TCF and failed to implement it when undertaking mortgage arrears and repossessions activities. In particular, in some cases the Firm:
(1) failed to discuss with customers all options available to them with regard to the method of repaying a payment shortfall, such as a switch in repayment type from repayment to interest only, an extension of the mortgage term, or capitalisation of arrears;
(2) failed to adopt a reasonable approach to the time over which the payment shortfall should be repaid taking into account the customer’s individual circumstance, such as allowing the customer to arrange repayments over a number of years or indeed the remaining term;
(3) failed to assess whether the customer’s offer of a regular payment was sustainable; and
(4) repossessed properties without first exhausting all attempts to resolve the arrears.
The Firm focused on collecting additional payments from customers over a short period of time and within fixed mandates. In some cases, the FSA found that ATPs were agreed with customers without a proper assessment of the affordability for the customer of the ATP or whether there was a better alternative for resolving the customer’s arrears situation based on their individual circumstances.
As a result of these failings, the Firm failed to treat certain of its customers fairly.
a fee for a returned direct debit which was charged on each re-presentation of the direct debit by the Firm regardless of the number of times it had already been returned unpaid;
a fee for a cancelled direct debit, which was excessive in light of the associated administration costs; and
the calculation and imposition of an early repayment charge on mortgage balances which included arrears fees and charges within that balance.
The above charges were excessive or and/or unfair because they did not accurately reflect the actual administrative costs incurred by the Firm or were otherwise unfairly applied to the customer.
So there we have it. Capstone do ALL this and more. Get in touch with anyone and everyone in the complaints section.
Compare the activities of Redstone, GMAC-RFC and Kensington to what the despised Capstone get up to. Indeed they lead the field when it comes to such practices.
And if complaining to the FSA doesn’t quite appeal, try complaining ABOUT the FSA.
You can do that HERE
16 Comments for “GMAC-RFC, Kensington & Redstone Breaches…But where is Capstone's Final Notice?”
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I have a complaint outstanding with Capstone about excessive charges and have asked them to give me the breakdown of their litigation charge of £115 and I doubt that they will be able to.
I have also just had the result of my complaint to the FOS about Barclays charges for arrears management. They charged me £40 a month for 5 years and have been told to repay them by the FOS.
I will be writing again to Capstone to tell them of this result and reminding them of the Redstone and GMAC ruling by the FSA and suggesting that it would be in their best interests to repay my charges for the last 5 years as well before the complaint goes to the FOS and the FSA.
I will let you know of the outcome.
SO WHY DON’T THEY APPLY THE SAME RULE TO CAPSTONE,HOW CAN YOU HAVE DIFFERENT CRITERIA FOR DIFFERENT OFFENDERS,USE IT AS A PRECEDENT EAGLE PROBLEM IS YOU ARE NOT REGULATED WITH THAT LOAN,ITS A REAL JOKE,WRITE TO YOUR MP CONTACT RICHARD DYSON HAS TO BE THE BEST BET.
Hi Eagleforms
Congratulations on giving the much hated Barclays a taste of their own medicine. Do you know of anyone who has managed to successfully challenge the reserve fees they introduced? I reckon they took in excess of £1500 on that and stiffed me for loads of £35 fees even when my complaint was active.
Anyway enough of THEM. Onto Capstone. As you can see just about everything GMAC-RFC, Kensington and Redstone have done Capstone DO IT BETTER, and they do more of it as well. It simply defies all logic that these rag tag and bob tail outfits can be carpeted by the FSA whilst the infinitely worse Capstone carry on with impunity. 5 years of Capstone charges is an awful lot of wonga. Good luck and keep your progress posted up here. Pete is going down the County Court route so between you both avenues are being explored for maximum effect.
Great result eagleforms noticed it on cag recently.
If you give a bit more detail could help peeps here and on cag with their complaints against the scum by quoting your result as a precedent.IE Barclays get done for charging £40 arrears fees how come capstone + cronies don’t.
Had notification yesterday from a government body that SPML were very close recently to sinking completely,but have had their necks saved from a buyer.
It seems to me that Capstone are more like the M**** than a credible company, on another note, has any one tried to have their payments altered through Capstones Mortgage modification Team,, Thats a joke, they give you a limited period to reply then cancel your request, unlucky if there is a delay in obtaining information you may require, it took me over 3 weeks to get info back from the DWP so although I had a reasonable excuse my application was rejected, and why when you phone them up do they insist on talking to you like your a criminal
Have any MP,s or the like highlighted this company in any way or form, now that the Government has reduced its financial assistance to those unemployed with mortgages it would appear that an increase in repossessions in inevitable, I personally have had my money reduced by £90 a month to make up the shortfall so now I cannot afford gas, electricity or food payments, so much for helping those in a vulnerable position
Sorry for the edit Colin but we need to be careful…I don’t like doing this so I would ask all posters to exercise self restraint and moderation. We have all done this from time to time.
returned home from solicitors yesterday morning, to a hand delivered eviction notice for 24 days from now, solicitors looking at contract and arrears charges, left all my files with them, so not sure how long they will take to get back to us on issues, sols close on xmas eve until new year…i need to file n244 form asap not sure which route to take. did say to capstone last friday, have new job starting in Jan and can maintain cmp plus arrangement, would get variation order on arrangement. MIS form returned to DWP of capstone, but they stated this means nothing and as of now(10th Dec) warrent being enforced and arrangement cancelled. Fos have all ccharges complaints with them since October!! Advice appreciated
Just to add on previous post, this is just a snapshot of what has been going on, capstone kept updated, have been paying what we can, admitidley not much due to other circumstances that have added to probs, arrear are now above £7k due to their charges again. Should have had their final response on why charges not being refunded 2nd dec and again 10th dec..still waiting.
brassed, being a vet you know the score on most things so email us here for direct help,we can beat the er..******* **** ,these very bad people.
borrowerstrust@gmail.com
Cheers ryde – will do, will put little un to bed and email, quite long winded,and the letter turned up today, so still digesting its contents
cheers brassed.
sent it now, sorry for delay
brassed we haven’t got it yet sure you have sent to right address borrowerstrust@gmail.com
sorry, keyboard gremlins, have sent again.
Hi , just spoke to my MP who assures me she will be writing to the FSA , FOS , Vince Cable etc about the unfair treatment and to ask that in these poor financial times these companys are investigated and held to account.