Abbey Fined Over Endowment Mortgage Complaints

by Robin Pilgrim, LawAndTax-News.com, London

26 May 2005

The UK's Financial Services Authority (FSA) announced on Wednesday that it has fined Abbey National plc £800,000 for mishandling mortgage endowment complaints and for providing the regulator with inaccurate and potentially misleading information in its response to a letter to CEOs, from then FSA Managing Director John Tiner, regarding proper handling of mortgage endowment complaints.

The FSA found that, between 1 October 2001 and 30 September 2003, Abbey mishandled around 5,000 complaints, including 3,500 that were rejected when they should have been upheld. Based on industry averages, losses of up to £19 million may have been caused to those 3,500 customers. During this period, the firm received 37,453 mortgage endowment complaints and, of the 20,044 cases it decided, it rejected 18,593 complaints (approximately 93 per cent). Between 1 January 2001 and 31 December 2004, Abbey received approximately 65,000 mortgage endowment complaints.

A detailed investigation of cases in every quarter of that 4 year period has not taken place. However, according to the FSA, the firm accepts it is likely that levels of failure similar to those found between 1 October 2001 and 30 September 2003 occurred throughout the 4 year period.

In determining the level of penalty, the FSA recognised that Abbey co-operated fully and quickly agreed the facts with the regulator so as to enable the settlement of the disciplinary case at an early stage. Abbey has also committed to remedying any consumer harm that it may have caused. The firm will review all mortgage endowment complaints rejected since 1 January 2000 and pay redress where appropriate and has launched a complete overhaul of its complaints handling procedures.

Clive Briault, the FSA's Director of Retail Markets, observed that: "By putting its own interests ahead of those of its customers with a mortgage endowment complaint, Abbey has singularly failed to treat its customers fairly. Its failings were made more serious as they occurred at a time when there was a high level of awareness within the industry about mortgage endowments and concerns regarding the fair handling of complaints."

He continued:

"Abbey would certainly have been in line for a far higher fine had its new owners not acted immediately to ensure that no customers would face loss as a result of its mishandling of complaints. By agreeing to review complaints it has rejected, and by committing to revise its entire complaints handling procedures, Abbey has taken positive steps to prevent its past mistakes in this area being repeated in the future."

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