The FSA has fined Redstone Mortgages £630,000 for poor treatment of some customers facing mortgage arrears.

Redstone has agreed to redress customers who were charged unfair and/or excessive charges while they were in arrears which could cost the firm up to £500,000.

The regulator identified a number of serious failings by Redstone which occurred between 1 January 2007 and 5 August 2009 in relation to its mortgage arrears handling processes and in its dealings with customers in arrears.

Redstone failed to ensure mortgage servicing staff acting on its behalf had adequate understanding of treating mortgage arrears customers fairly and was focused on reducing arrears to less than two months, regardless of the customer’s personal and financial circumstances.

The FSA also found Redstone to have written policies that led, in some cases, to the unnecessary use of litigation to secure arrangements to pay, as well as sending repetitive, excessive and confusing correspondence and applying four charges to customers’ accounts that were unfair and/or excessive.

The four charges included a fee for a returned direct debit which was charged regardless of how many times the direct debit had already been returned unpaid.

Redstone included arrears fees and charges in the balance on which an early repayment charge was calculated and charging for field counsellor visits in full to some customers who had not been properly informed of the timing of the visit and/or of their right to refuse or cancel the visit or who should have been charged a reduced rate cancellation fee.

The regulator also found Redstone had charged a fee for for litigation activities, which was applied even when such activities were taken by Redstone unnecessarily.

Under FSA rules, a firm must pay due regard to the interests of its customers and ensure they are treated fairly. Redstone was in breach of these rules for a significant period of time.

Margaret Cole, director of enforcement and financial crime, said: “Many of Redstone’s customers were in a vulnerable position