Abbey fined for mishandling complaints

Abbey National has been fined £800,000 today for mishandling mortgage endowment complaints and for providing inaccurate and potentially misleading information to the financial services watchdog.

The Financial Services Authority handed down the fine, following an investigation into the bank's handling of complaints from its mortgage endowment customers.

Between January 1 2001 and December 31 2004, Abbey received approximately 65,000 mortgage endowment complaints. Between October 1 2001 and September 30 2003 - the period investigated by the regulator - the bank received 37,453 mortgage endowment complaints and, of the 20,044 cases it made a final decision on, 18,593 - nearly 93% - were rejected.

The FSA found that it had 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 £19m may have been caused to the customers involved.

Abbey has admitted that similar failings were likely during the rest of the four-year period in question.

The bank was also found to have misled the regulator in letters it wrote in April and May 2002. In these, Abbey claimed that it was already applying advice on the proper handling of mortgage endowment complaints outlined by the FSA's managing director at the time, John Tiner.

In fact, the FSA found that the firm had not properly applied three of the principles raised in Mr Tiner's letter. It said that Abbey's conduct fell well below the standards it would expect of an authorised firm's communications with the regulator.

However, Abbey managed to escape a higher fine by cooperating with the FSA's investigation and committing to a review of all mortgage endowment complaints rejected since January 1 2000. It will pay compensation where appropriate and has launched a complete overhaul of its complaints handling procedures.

Clive Briault, the FSA's director of retail markets, said: "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."

"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."

Abbey will review all complaints made between January 1 2000 and May 25 2005 about policies it sold and advised on, with the exception of any cases that have gone to the Financial Ombudsman. The total number of cases being re-examined is around 50,000.

The bank will write to those customers affected by June 22 2005, and expects to have completed the review by the end of the year.

Consumer group Which? welcomed the FSA's ruling, but said its findings raised questions about how other providers have handled endowment complaints.

Louise Hanson, head of campaigns at Which?, said: "We fully expect Abbey to learn from its mistakes and its new owners now have an opportunity to ensure its systems are more focused on its customers in future. However, if a bank the size of Abbey has failed to handle complaints in a fair way then it leads you to question the record of other major players.

"Which? is also concerned that it has taken the FSA so long for them to name and shame bad practice that goes back as far as 2001 and possibly even further."

Abbey is not the first endowment provider to be fined by the FSA. Friends Provident Life and Pensions was fined £675,000 in December 2003 for failures in its procedures which led to the mishandling of mortgage endowment complaints, and in March 2004, the FSA fined Allied Dunbar Assurance plc £725,000 for serious flaws contained in its procedures for handling mortgage endowment complaints.