Consumer body slams regulators

By GUY DRESSER
Updated:

 

COMPANIES that mis-sold endowment mortgages should waive the right to impose time limits on people to apply for compensation, the Consumers Association declared today.

In a savage attack on regulators and financial services companies the Consumers Association said it planned to 'name and shame' those who do not waive the limits, in order to draw public attention to the situation.

The call comes a day after the Treasury admitted that as many as 700,000 consumers are time-barred from getting redress for mortgage endowment mis-selling.

Teresa Fritz, principal researcher at the association, said that the scale of the problem was a reflection of how badly the financial services industry had treated consumers. She also severely criticised the Financial Services Authority for failing to get to grips with the problem.

'The disclosure yesterday by the Treasury that possibly 700,000 consumers are time-barred from getting redress for mortgage endowment mis-selling was shocking and an indictment of the Financial Services Authority (FSA) and the industry's complacent handling of the endowment crisis,' she said.

'The public needs to know when the Treasury and FSA knew about the sheer number of consumers who might be denied redress.'

Fritz said that all financial services companies which missold endowments should follow Legal & General's lead in waiving the right to impose time-bars for people who have been mis-sold endowment mortgages.

The Consumers Association says that anyone who has missed the deadlines should still be able to obtain compensation to make up for their underperforming policies.

Fritz added: 'For those who refuse to waive the time limits we're calling on the government and the FSA to force the Association of British Insurers and the rest of the insurance industry to guarantee consumers, who are entitled to compensation, the redress they deserve.

'We will regularly publish a statement of the companies prepared to waive time-bars on customers entitled to redress, and those that refuse.'

This Is Money revealed earlier this year that unless stock markets enjoy massive growth each year for the foreseeable future, some 7m homeowners will see their endowments fall short of paying off mortgages by an average £6,900.

There are just over 10m mortgage endowment policies in force. Analysis by the Association of British Insurers indicates that 70% of them are predicted to miss their mortgage targets.

Executives at Legal & General knew they were mis-selling mortgage endowments during the late 1990s, documents obtained by the Financial Mail in January revealed.

Emails sent between senior directors and passed on by an L&G whistleblower show that in 1998, Mike Bolton, the insurance giant's UK actuary at the time, believed endowments no longer had a role to play in the mortgage market.

Yet despite these concerns, the risk to customers and the threat to its reputation, L&G continued to sell them for at least two more years.

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