Endowment sellers told to improve complaint procedures

The Financial Services Authority (FSA) issued a warning today to mortgage endowment providers to deal with complaints properly and not to side step them by sending customers on to the Financial Ombudsman Service (FOS).

In a letter sent to the chief executives of larger mortgage endowment firms and financial advisers, the City watchdog said that some companies were still failing to meet the required standards when it comes to dealing with complaints.

The FSA managing director of retail markets, Clive Briault, said: "Fair handling of complaints is one of the key indicators that firms are treating their customers fairly.

"We are concerned, in particular, that the Financial Ombudsman Service is not only continuing to face a rising number of endowment complaints, but is also upholding a very high percentage of complaints about some firms, suggesting that these firms may not be handling complaints properly.

He said that firms should not manage their own caseloads by allowing an excessive number of complaints to go to the FOS.

"High uphold rates of complaints against some firms by the FOS also suggests that there may be other customers - who have complained on issues very similar to those considered by the FOS but have not taken their complaints to the FOS - who may not have had their complaints properly considered.

"The FOS has also informed us that some firms have repeatedly turned down complaints on grounds which appear only very slightly different to those used in connection with earlier batches of complaints which the FOS has upheld.

"Our own work has also identified inconsistencies in some firms' decision-making. Such behaviour is not in keeping with the spirit or letter of our requirements."

This is not the first time endowment providers have been told off. In April 2002, the then managing director of the FSA, John Tiner, wrote to executives to stress the importance of the fair handling of complaints and asking for assurance that the industry would handle complaints in a way which provides full and fair opportunity to have things put right for those who have been mis-sold.

However, the watchdog is not convinced that enough has been done to improve the standard of complaints handling, and wants firms to review their policies and procedures and to confirm they are appropriate. Where this is not the case, they should take action now.

Louise Hanson, head of campaigns at consumer rights organisation Which?, said: "The number of companies the FSA has identified who are 'failing to meet the required standards' in dealing with complaints is depressing, especially considering it's nearly three years since John Tiner wrote a similar letter to companies outlining the FSA's concerns about the ways in which complaints are being handled and asking for a review of procedures.

"We are astounded at the bad faith shown by companies who make millions of pounds worth of profit from consumers but are trying to wheedle their way out of paying compensation when it's due - sometimes waiting right up to the point of court action. It can't be a surprise to anyone that consumers have lost faith in the financial services industry.

"John Tiner's letters are clearly not having the desired effect. The FSA should order these companies, under FSA supervision, to re-investigate all rejected complaints to determine whether they have acted reasonably.

"The FSA must continue to take these bad apples to task by immediately naming and shaming them, and then implementing significant fines where rules have been broken."