The Financial Services Authority (FSA) has issued a stark warning to mortgage brokers that they must be fair to their customers or they could be landed with a penalty. The advice comes after the FSA fined a mortgage broker in Doncaster £34,500 for failing to provided appropriate advice to its customers.

According to the FSA, between October 2005 and March 2006 around nine hundred customers with Orchid Financial Limited were at risk of being sold mortgages that were inappropriate to their needs due to unsatisfactory supervision of advisors and inadequate record keeping.

Jonathan Phelan, head of retail enforcement at the FSA, commented: "Orchid's failings meant they could not demonstrate that their mortgage advice and sales were suitable. This fine sends out a clear message to brokers that their advice must be of good quality - otherwise there is a likelihood that they will not be treating customers fairly."

The FSA said Orchid had fully cooperated with its enquiry, and found no grounds of actual consumer detriment. Based on this lack of evidence the penalty was reduced.

Two similar cases have been reported in Stokesley and Bexleyheath where directors from Abbey mortgages were fined by the FSA for failing to verify the affordability of the mortgages recommended to their customers.

Earlier this year a mortgage company in the North East exposed 500 of its customers to poor advice but dodged a £60,000 fine from the City regulator because of the managing director’s own personal financial difficulties.

His business was fined just £17,500 and had its trading permission stripped after the regulator found hundreds of customers were at risk of receiving unsuitable advice.

Shortly after the regulator gave out out a record £129,000 fine to a broker for committing identity theft on its clients to take out loans using the unsuspecting victims details.

Published by Sam Gooch