The Financial Services Authority (FSA) has ordered GMAC-RFC to pay a record £10.5 million in charges after finding the lender guilty of treating unfairly its customers in arrears.

The City regulator levied a £2.8 million fine — more than double the previous highest penalty for a mortgage case — on the group, which was one of the biggest issuers of sub-prime and buy-to-let mortgages during the property boom.

GMAC must also pay refunds worth a total of £7.7 million to holders of more than 100,000 accounts who were victims of “serious failings” between October 2004 and November 2008. The regulator said that the lender — part of GMAC Financial Services, the American company in which General Motors had a majority shareholding until 2006 — was guilty of applying excessive and unfair charges that did not reflect administrative costs. It was also guilty, said the FSA, of failing to take account of customers’ circumstances, inadequate staff training and not considering alternatives to repossession.

Despite the size of the fine, industry experts yesterday rounded on the FSA for not acting quickly enough to protect borrowers. The regulator began its work on the handling of arrears and repossessions by firms in September 2008. It presented its findings to GMAC 11 months later. During this period, thousands of borrowers either lost their homes or were in arrears with GMAC. Although those who were repossessed during this time will be eligible for a refund of charges, the FSA’s measures do not include compensation for being repossessed.

Melanie Bien, director of Savills Private Finance, the mortgage broker, said: “It is disappointing that it has taken the FSA so long to take action against GMAC for not treating customers fairly. This comes far too late for many people who were in arrears or had their homes repossessed. If action had been taken sooner, they may have avoided such a traumatic and unnecessary experience.”

GMAC fed off the property boom in the run-up to the collapse, becoming the 11th-biggest lender in the UK by 2007 after entering the market nine years earlier. It pulled out in 2008 and continued to serve only existing customers. The firm has since rebranded itself as an “international mortgage asset management company”, with about £3.9 billion of regulated contracts under its administration.

Almost 190,000 accounts worth £24.6 billion were held with the lender during the period, the FSA said. More than 46,000 accounts were subject to “non-payment by direct debit charges” worth £15, which will be repaid with interest following the decision. The FSA said that GMAC had levied the charges to cover the administration costs of payments, even though the borrowers were not making payments because they were in arrears. A further 41,000 accounts will be eligible for refunds of £39 plus interest for solicitors’ instruction fees that were levied unfairly.

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