The UK Financial Services Authority has fined mortgage lender Capital Mortgage Connections GBP17,500 for rule breaches including cold calling potential customers.
This is the first time the regulatory body has fined a firm for cold calling. The fine also incorporated Capital Mortgage Connections’ (CMC) failure to treat its customers fairly by being unable to demonstrate that it gave appropriate pricing information on the accident, sickness and unemployment (ASU) insurance polices it sold. A further failing was its inability to establish and maintain appropriate systems and controls, the Financial Services Authority (FSA) said.
The failings were discovered during an FSA visit in November 2005 and the breaches occurred between April 4, 2005 and October 17, 2005.
The investigation discovered that 85% of the business generated by the firm was from cold calling. It also indicated that 97% of ASU insurance policies sold by the company were on a single premium basis. CMC did not appear to be advising its customers correctly, nor was it informing customers of other potentially cheaper monthly options.
Cold calling potential customers for mortgage business is against our rules and firms operating in the industry should be aware of this, said Jonathan Phelan, head of retail enforcement at the FSA. This is the first time we have taken steps against a firm for undertaking this activity and we will continue to monitor the market for instances of cold calling.
The regulator has instructed the mortgage firm to carry out a past business review to all existing single premium ASU insurance policy customers to ensure they are fully aware of the benefits, cost alternatives, terms and conditions of the product they have and the reasons why they were recommended the single premium plan.