The Consumers’ Association (CA) is demanding the Financial Services Authority (FSA) takes immediate action to help consumers caught out by mortgage endowment shortfalls and has published an action plan for the watchdog to follow.
The CA said the FSA should put its plans to reform financial advice on hold until it has tackled the problem of commission-driven sales which, according to the CA, is one of the biggest causes of mortgage endowment selling.
Sheila McKechnie, director of the CA, said: ‘With as many as six million homeowners unable to pay off their mortgages at the end of the payment term, the FSA can no longer afford to sit on its hands. How many more million people need to be affected before the FSA acts? We believe there could be a significant proportion of consumers currently facing a shortfall, who could have been mis-sold an endowment policy and should be helped to obtain redress and financial compensation. The FSA must act to help this silent minority.’
McKechnie added that as an immediate course of action the FSA must publish the data it holds on the companies involved and a list of the worst performers.
Other demands in the CA’s action plan include identifying how many consumers are complaining and how much compensation they have received to date. It also demanded that the FSA ensures consumers sold endowments before the compensation scheme began in April 1988 are protected.
In a bid to help confused policyholders, consulting actuary Hazell Carr has teamed up with the same provider the Financial Ombudsman Service uses to calculate endowment shortfalls, Exasoft Ltd, to help insurers and IFAs deal accurately with the rising number of complaints. Insurers and IFAs have to inform clients about their endowment performance, so it is anticipated that complaints departments will be put under increasing pressure.
Nigel Burton, marketing director at Hazell Carr, said: ‘We have been listening to concerns about handling mortgage endowment complaints and believe we have come up with the comprehensive solution our clients have been seeking.’