FSA/PN/109/2007
18 October 2007

The Financial Services Authority (FSA) has fined The Minel Group Limited (Minel) £10,500 for exposing consumers to the risk of being sold an unsuitable equity release (lifetime) mortgage.

In addition, Minel, based in Newcastle Upon Tyne, has to review its sales of lifetime mortgages from 9 November 2004 to 9 December 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 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:

  • Minel had insufficient procedures for controlling its lifetime mortgage business and the quality of advice provided;
  • It 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.

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."

Minel 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 £15,000.

Notes for editors

  1. Minel is a small mortgage and general insurance intermediary. Its main business is commercial and buy-to-let mortgages. Minel has been regulated by the FSA since 31 October 2004. Its authorised business includes advising on and arranging insurance and regulated mortgage contracts. The Final Notice is available on the FSA website.
  2. A lifetime mortgage is a form of equity release. More information about the FSA’s equity release thematic work is available on the FSA Website (see Press Notices 055/2005 and 071/2006).
  3. In February 2007, the FSA wrote to firms carrying out low volumes of business in the lifetime mortgage market. The letter urged firms to consider what further steps they need to take to ensure that customers are treated fairly in relation to their lifetime mortgage business.
  4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

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