Hadenglen and CEO fined over re-mortgage and PPI selling

LONDON - The UK Financial Services Authority (FSA) has fined Hadenglen Home Finance £133,000, and its chief executive Richard Hayes £49,000, for using inadequate systems and controls when recommending re-mortgages and payment protection insurance (PPI) to customers. This is the first time the FSA has fined both a firm and its chief executive for re-mortgage and PPI failings.

In May 2006 the FSA found that Hadenglen had exposed around 2,000 re-mortgage and 1,900 PPI customers to an unacceptably high risk of buying a product that might not have been in their best interests. PPI customers were advised to purchase a product that might not have been suitable for their needs or under which they were not able to claim.

Hayes was responsible for business practices, and appropriate systems and controls for selling PPI and re-mortgages. He failed to ensure that sales practices for PPI were adequate, while his sales strategy for re-mortgages did not consider the risk that customers would have to pay an early redemption charge and other fees when re-mortgaging might have been unsuitable. Hadenglen did not gather enough information from customers and did not take into account the cost of payment protection insurance when making a recommendation.

The fines would have been much higher had Hayes not in the interim implemented a comprehensive review of systems and controls, retaining external consultants to advise on the process. Hadenglen has now implemented a remedial action plan for its consumers, including a customer-contact exercise and amendments where appropriate.

Hayes and Hadenglen also agreed to an early settlement to the FSA investigation, qualifying under the executive settlement procedures for a 30% discount. Despite this, the FSA said its judgment should leave senior management in no doubt of being held to account should they fail to treat customers fairly.