All three had inadequate mortgage sales and advice procedures which exposed their customers to the risk of receiving unsuitable advice, according to the financial services regulator.

The FSA revealed that it has fined The Loan Company trading as Greenhill Finance (TLC) GBP31,500 and Next Generation Mortgages Limited (NGM) GBP10,500. It has also stopped Homebuyer Securities Limited (HSL) from trading.

The FSA investigations found various failings in the firms, including the fact that TLC and NGM failed to correct record keeping failings identified during FSA visits in 2005.

They also did not gather adequate customer information to assess affordability or support the mortgage recommendations made; TLC did not adequately train its staff, failed to monitor or review client files properly and gave customers inconsistent information about the key features of the product; NGM could not demonstrate why recommendations were made and it failed to explain the details or risks of recommended mortgages to customers; and HSL did not ensure that all of its advisers were qualified to give mortgage advice.

As a result of their failings NGM has agreed to stop selling self-certification mortgages, which require no verification of income by lenders, and HSL has agreed that its director will never work as a mortgage broker again. All three firms have been required to conduct a past business review to identify whether customers have suffered losses as a result of receiving unsuitable advice.

Margaret Cole, FSA Director of Enforcement, explained that:

"Firms who do not comply with FSA standards taint the entire mortgage industry which is totally unacceptable. Any firms who place their customers at risk of receiving unsuitable advice through inadequate business processes can expect strong action from the FSA. Firms must ensure they have appropriate systems to protect their customers."

She continued:

"There are a number of actions we can take against firms and individuals which includes fines, public censures or stopping firms and/or individuals from doing business. In addition to these penalties we can also instruct a firm to conduct a detailed and lengthy review of their clients' files. This will establish if any customers are owed redress and could cost firms many thousands of pounds."

TLC and NGM agreed to settle at the first stage of the FSA's investigation, thereby qualifying for a 30% discount. Without this discount, their fines would have been GBP45,000 and GBP15,000.

The firms' failings were found during the FSA's work on the sub-prime mortgage market, looking at responsible lending practices and firms’ assessments of a consumer’s ability to afford a mortgage. As a result, five firms were referred to enforcement.