Thinc group fined over sub-prime mortgages

The FSA last month fined Thinc Group £900,000 for not having adequate risk management and compliance systems for its sub prime mortgage business, and for failing to take reasonable care to ensure that it had records to prove that advice it gave to customers in relation to the sale of sub prime mortgages was suitable.

The FSA said that between 1 January 2006 and 30 September 2007 Thinc failed to obtain adequate financial information about some of its sub prime mortgage customers before giving advice; failed to demonstrate that those customers' credit histories merited the sale of a sub prime mortgage; failed to demonstrate why the particular sub prime mortgage products that it recommended matched those customers' needs and circumstances; failed to demonstrate that it had considered the affordability of the sub prime mortgage contracts that it recommended to those customers; and provided some of those customers with a 'Record of Suitability' letter that did not correspond to the product advised or taken.

In other words, customers of Thinc may easily have been sold a mortgage that was more expensive than they needed.

During that period Thinc acted as broker in the sale of 775 regulated sub prime mortgage contracts representing total consumer borrowings of £76.9m. These mortgage sales generated revenue for the firm of approximately £0.7 million. So the FSA's fine more than wiped out Thinc's profits from these sales.

How much more money did Thinc make from its customers? During that period it also brokered 18,015 regulated mortgage contracts, representing total consumer borrowings of £2,706 million. These mortgage sales generated revenue for Thinc of almost £36 million during the relevant period.