Industry still not doing enough about endowment mortgages says consumer panel

The Consumer Panel has been monitoring the FSA’s activities on endowment mortgages since the Panel was set up in 1998. It believes that the industry is still reluctant to admit the real scale of the problem. The Panel’s own research has shown that 54% of respondents recalled being told at the point of sale that their endowment "would definitely" or "was guaranteed" to pay off their mortgage, which suggests a mis-sale. It was clear also that many policy holders were not told that their policy was linked to the stock market.

The Panel highlighted where firms have had to be pressed into action by the FSA on many of the issues related to endowments. For instance, in order to ensure that complaints were handled properly, the FSA had to write to firms (John Tiner’s letter to all chief executives of April 2002). It has also had to take supervisory initiatives and enforcement action against those who have failed to treat their customers fairly.

At the same time, the Consumer Panel believes that there have been occasions when the FSA has been too willing to accept the reassurances of firms that they were communicating effectively with consumers about problems relating to endowment policies.

The Panel has also raised the following issues in its evidence to the Select Committee:

* Consumers have not received enough advice and guidance to help them to know if they have any grounds for a compensation claim. For instance, the FSA’s information leaflet ‘Endowment mortgage complaints’ was not sent out to all policy-holders;

* The FSA could have acted more quickly, and must get ahead of the game in warning consumers and helping them when things go wrong.

* The FSA must undertake an audit review of the different arrangements which they have used for consumer redress, from the pensions review, to endowments, to individual firms compensating consumers, so that there can be a clearer idea of the best methods of redress. At the moment on endowments, neither the industry nor the FSA has produced a formal assessment of how many people may be due compensation from mis-selling.

Ann Foster, Chairman of the Panel said:

"If the financial services industry wants to play its part in restoring consumer confidence, it must take seriously the need to treat customers fairly. They must learn from past mistakes. The FSA must constantly monitor and direct firms, and most important of all, consumers need access to a properly funded, objective source of generic financial advice."