The FSA is not letting up the pressure on lenders as evidenced by another significant fine issued against a UK lender. Yet again the amount was substantial and the resultant customer redress program comprehensive and costly. However, there was one noteworthy departure from the regulators language in this decision notice; for the first time the FSA used the term “irresponsible” lending in the title of its press release.
Anyone who has reviewed lending files in support of PI claim activity over the last 20 years will be aware of a significant change in the documentation available in the 1990’s compared to now. Putting it simply, back in the 1990’s, lending policy documents were vague or non-existent, but lending decisions were well documented. Now we see lending manuals that are generally comprehensive, but the lending decisions are often unclear, illogical, sometimes non-compliant with the lenders own policies and in some cases reckless.
It seems the FSA found the same situation; the main thrust of the “irresponsible lender” allegation was non-compliance with the lenders own procedures in two key areas. 1) Interest only mortgages – where the applicant stated the loan was to be paid off from the sale of the property and 2) Self-certification applications where an applicant could have proved income and would as a result have qualified for a product at a lower interest rate.
The message to lenders could not be clearer – having produced comprehensive lending manuals, stick to them!
The million-dollar question remains – how will lenders monitor and audit their activities and ensure they avoid such fines in the future?