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FSA fines Minel for lifetime mortgage selling failures

The Financial Services Authority of UK has fined The Minel Group, a mortgage and general insurance intermediary, GBP10,500 for exposing consumers to the risk of being sold an unsuitable equity release mortgage.

In addition, Minel has to review its sales of lifetime mortgages from November 9, 2004 to December 9, 2005, to compensate customers for any loss caused by unsuitable advice, and has agreed to stop selling lifetime mortgages.

This is the first time the Financial Services Authority (FSA) has taken enforcement action against a lifetime mortgage adviser.

The FSA discovered persistent record keeping failures and systems and controls deficiencies during visits to the firm as part of its thematic work on equity release advice which reveals that Minel had insufficient procedures for controlling its lifetime mortgage business and the quality of advice provided.
Minel failed to record sufficient information about customers’ personal and financial circumstances to establish their needs and objectives, and to demonstrate the suitability of its recommendations. And, despite lifetime mortgages being a higher risk product, Minel did not have any specific training and competence procedures for training staff or ensuring effective monitoring of competence.

Minel has agreed to settle at an early stage of the FSA’s investigation and therefore qualified for a 30% discount of the fine under the executive settlement procedures. Without the discount the fine would have been GBP15,000.

Georgina Philippou, head of retail enforcement at the FSA, said: We remain concerned about higher risk products like lifetime mortgages, and the FSA has been monitoring this aspect of the market since mortgage regulation began. Firms must have appropriate systems and controls in place to ensure that suitable advice is given on these products even where, as in this case, a firm is writing low volumes of business.

This is the first time we have taken such action against a lifetime mortgage adviser, and the combination of a fine, a past business review, and ceasing all lifetime mortgage business should leave firms in no doubt that the FSA will hold them to account if they fail to treat their customers fairly.