GE Money Home Lending short-changed hundreds of its mortgage customers for more than two years by failing to rectify systems failings.

The company, which has half a million personal customers in the UK and whose ultimate parent company is General Electric, was fined £1.12 million yesterday by the Financial Services Authority. The regulator said that 684 customers, including poorer sub-prime borrowers, suffered a financial loss of £2.3 million.

GE Capital Bank, a sister company that has since been sold, was fined £610,000 last year for its role in the mis-selling of payment protection insurance. GE Money Home Lending’s problem was in the handling of retentions — amounts withheld for six months from a mortgage borrower pending repairs to their home. It sometimes failed to explain the terms of these retentions, failed to pay out the retentions on time, continued to charge interest when it was no longer due and failed to deduct retentions when a mortgage was redeemed.

It identified the problem in 2004 but nothing was done until 2006, the FSA said. The fine would have been £1.6 million but for GE’s co-operation. The failings were not deliberate or reckless, the FSA ruled. Margaret Cole, director of enforcement at the FSA, said: “The firm’s failings were serious because a large number of the borrowers, including some with impaired or non-standard credit profiles, were put at risk of financial loss.”

GE has since compensated about 5,500 customers and put an end to the retentions arrangements.

Colin Shave, chief executive of GE Money Home Lending, said: “We regret the events which led to this situation and, although the number of affected borrowers was small compared to our overall customer base, we sincerely apologise to those who were affected.”

The mortgages were sold under the GE, Igroup and First National brands. GE has 200,000 UK mortgage customers.