Endowments - consumers act but FSA keeps close eye on complaints

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Anna Bradley

It is important for consumers that firms handle complaints fairly, effectively and promptly – as our rules require

The findings showed that around 2.2 million households (82% of those that still have an endowment-linked mortgage) have an average projected shortfall of £7,200 . The majority of the 2.2 million households (69%) have taken action to address their situation and a further 14% intend to take action in the future. Just over a million households (48%) have restructured their mortgage, savings or endowment; other action taken includes seeking advice or pursuing a complaint.

So far, the FSA has distributed more than 29 million endowment factsheets to consumers, either directly or via firms, and since 2000, nine firms have been fined for endowment-related failings. The FSA has also worked with many other firms to ensure they address misselling and complaint handling issues. The FSA is now entering the next phase of work on mortgage endowments, which will focus particularly on firms' complaint handling.

Firms must continue to handle complaints properly. The FSA will continue with its programme of robust supervision and, where necessary, enforcement. It is establishing a set of key performance criteria to identify any firms that are still failing to meet acceptable standards.

The FSA will also pay particular attention to how firms prepare themselves for any potential increase in the numbers of complaints over the next 12 months, following the issue of further 'red' reprojection letters and the implementation of time bars by some firms.

Anna Bradley, the FSA's Director of Retail Themes, said:

"It is important for consumers that firms handle complaints fairly, effectively and promptly – as our rules require. There has been a sustained effort by the industry to improve complaints handling; we will now be focussing our efforts on those few firms that have not yet established appropriate standards. And we also expect firms to act now to make sure they have adequate contingency plans in place for any increase in the volume of complaints. Those firms not maintaining acceptable standards of complaints handling, will be required to rectify the situation. Where necessary, we will use the full range of remedial sanctions available to us to achieve our objective."

Notes for Editors

For a full copy of the report, entitled 'Mortgage endowments: progress report and next steps' and the research, entitled 'Mortgage endowments – shortfalls and consumer action', please access the FSA website.
The main element of the research was a face-to-face survey of 1,242 households with an endowment linked mortgage, carried out between September and December 2004. 134 additional interviews were carried out in the same period to supplement the main survey.
Reprojection letters to consumers show three rates of return. The number of consumers with a projected shortfall, and the average shortfall, are based on the middle or 'medium' rate of return. The figure of 2.2m households with an average projected shortfall of £7,200 refers to those who have a shortfall on their endowment mortgage and not necessarily to those that have a valid complaint for misselling. The 'average shortfall' figure is per household, and may involve more than one policy.
The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve our business capability and effectiveness.

Endowments - consumers act but FSA keeps close eye on complaints

Anna Bradley

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Notes for Editors

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