A fine has been issued to Deutsche Bank for its poor mortgage practices that were unfair to thousands of customers who took out home loans.
Compensation will be paid out to people who took up mortgages with Deutsche Bank.
Deutsche Bank has been fined £840,000 for irresponsible mortgage lending during the two year period before the credit crunch hit the British economy.
The move, made by the Financial Services Authority (FSA), means that Deutsche Bank is the first financial company in the UK to be issued a penalty for poor lending practices.
The bank will also have to pay £1.5 million in compensation to almost 8,000 borrowers and will be contacting those affected to arrange payments.
The FSA found that the bank was guilty of “irresponsible lending practices and unfair treatment of customers in arrears” when it sold mortgages to people with a poor credit history in 2006 and 2007. Just under 8,000 mortgages were arranged during this period and when borrowers fell back on their repayment plans they were hit with unfair charges, according to the FSA.
The Authority also highlighted that staff working at the bank did not check whether customers would be able to afford their mortgage repayments if their loan continued into retirement or offer cheaper options to borrowers who wanted self certified mortgages. They also failed to find out if customers had thought about where they would live if they planned to sell off their home in order to pay off their interest only mortgages.
Margaret Cole of the FSA said: “This is the first time that we have taken enforcement action against a firm for irresponsible mortgage lending”.
She added: “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 by their failings”.
A Deutsche Bank spokesman said: “Following the identification of the issues raised by the FSA in an industry-wide review started in 2008, DB mortgages immediately commissioned a third-party review into its lending and arrears collection processes. As a consequence, DB mortgages has improved its oversight of mortgage servicing activities”.