FSA fines broker for self-cert failings

The FSA has fined Nottingham mortgage broking firm Gillen Farrelly Independent Advisers £17,500 for failing to ensure it provided suitable advice which exposed over 80 customers to the risk of being sold an unsuitable self-certified mortgage.

The regulator said that between January 2006 and April 2008 the firm failed to make appropriate enquiries about customers' income, expenditure, credit history and debt position, so that it could properly assess the affordability of its recommendations. The FSA also revealed that Gillen Farrelly Independent Advisers failed to record sufficient personal and financial information about customers to demonstrate the suitability and reasons for its recommendations, while not conducting adequate due diligence in respect of a third party introducer.

Georgina Philippou, head of retail enforcement at the FSA, said brokers advising on mortgages needed to give suitable advice to ensure that customers are not unduly exposed to financial hardship in the future. She explained: "This is especially important in firms like Gillen Farrelly who advise customers who might be consolidating debts or have adverse credit histories and where affordability is an important consideration."

In setting the penalty the regulator said it had taken into account the fact that Gillen Farrelly voluntarily engaged a firm of external compliance consultants to conduct a compliance audit in May 2008, had terminated its arrangements with the introducer and has not accepted any referrals of mortgages from the introducer since November 2007.

The firm no longer sells self certification mortgages and has agreed to undertake a customer contact and remediation exercise. Gillen Farrelly also agreed to settle at an early stage of the FSA's investigation. Because of these factors, the firm qualified for a 30% reduction in penalty. The FSA said that it would have otherwise imposed a financial penalty of £25,000.