Kensington Mortgage Company has been fined £1.225 million by the FSA for unfair treatment of some customers in arrears.

It will also pay around £1.066 million in customer redress for those who were in arrears and charged specific unfair and/or excessive charges.

The city regulator identified a number of serious failings by Kensington which occurred between 1 January 2007 and 31 October 2008 in relation to its mortgage arrears handling processes and in its dealings with customers in arrears.

These include failing to ensure mortgage servicing staff acting on its behalf had adequate understanding of treating mortgage arrears customers fairly and concentrating on the repayment of mortgage arrears over a short period of time rather than agreeing an arrangement to pay the arrears based on the customer’s individual circumstances.

Kensington was also found to have applied three charges to customers’ accounts that were unfair and/or excessive. These were a fee for a returned direct debit which was charged regardless of how many times the direct debit had already been returned unpaid an “excessive”” fee for cancelled direct debits which did not reflect administrative costs and an early repayment charge on mortgage balances which included arrears fees and charges within that balance.