The Financial Services Authority (FSA) has issued a response to the Consumers Association (CA) with regards to the issue of mortgage endowment shortfalls.
In a letter sent to the CA, Howard Davies, FSA chairman, addressed some of the issues previously raised by the CA, such as the liability of consumers being sold endowments before the compensation scheme was initiated in 1998.
Penalty fines were raised and Davies believes the current rule, enabling proprietary life offices’ discretion on how they fund fines, is unfair. He said the FSA has proposed a change to the rules.
The change states: ‘If we impose a financial penalty (a fine) on a long-term insurer, the insurer must not pay the penalty from any of its long-term insurance funds. This includes any with-profits funds. This would only apply to long-term insurers who are not mutual.’
The FSA pledged to continue investigating firms liable to mis-sell.
Davies added: ‘We will continue our commitment to investigate areas of potential consumer detriment such as high charges. We have focused on specific firms and required them to compensate consumers. We have taken public enforcement action against two firms and are continuing investigations into a number of firms.’