FSA imposes biggest mortgage fine ever

LONDON (Reuters) - The financial regulator slapped the country's biggest mortgage-related fine on home loans provider GMAC-RFC for overcharging and dealing unfairly with customers in arrears.

In addition to the 2.8 million pounds fine, GMAC-RFC will repay 7.7 million pounds in unfair or excessive charges to 46,000 customers, the regulator said on Thursday.

The fine is the Financial Services Authority's biggest mortgage-related penalty since it fined GE Money Home Lending 1.12 million pounds last year, a spokeswoman said.

The FSA said GMAC-RFC took administration fees from customers out of proportion to its costs and initiated repossessions before fully considering the alternatives.

Part of GMAC Financial Services, the lender that grew out of U.S. car maker General Motors, GMAC-RFC began offering mortgages in 1998, and ranked as the country's eleventh-biggest home loan provider by 2007. The company stopped lending to new customers last year.

"We want to apologise to customers affected," it said in a statement.

"We fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required."

The biggest fine from the FSA to date is the 17 million pound penalty it imposed on oil giant Royal Dutch Shell (RDSa.L) in 2004 for overstating its oil and gas reserves.

(Reporting by Myles Neligan)