Treat complaints fairly, endowment firms told

Mortgage endowment providers were yesterday ordered to improve their complaints procedures.

The Financial Services Authority said some firms were adding insult to injury by not handling complaints about mis-selling fairly.

It said several firms were "failing to meet the required standards" and warned that if they did not raise their game, it would consider enforcement - probably in the form of six-figure fines.

The FSA's intervention comes 10 months after a committee of MPs criticised firms for not handling mis-selling complaints properly, and almost three years after the regulator wrote a similar letter to insurers and financial advisers to stress the importance of treating customers fairly.

Millions of homeowners have received letters warning that their endowment policies may not produce the cash they need to pay off their mortgages. Deep cuts to bonuses and final payouts have worsened the situation, leaving many people facing sizeable shortfalls on their home loans.

Complaints about mortgage endowments have snowballed, reflecting growing anger among homeowners. The financial ombudsman service received 51,900 complaints in the year to March 31 2004, but it emerged yesterday that the ombudsman expects this year's total to top 65,000 - the equivalent of 1,250 a week.

In a letter to the chief executives of larger mortgage endowment firms and financial advisers, the FSA said that while many firms were achieving the required standards and taking people's concerns seriously, there were some firms that were failing to do so. It declined to name the guilty parties.

Clive Briault, the regulator's retail markets managing director, said it was concerned that the financial ombudsman was not only seeing a rising number of endowment complaints, but was also upholding a "very high percentage" of complaints from some firms. This suggested that these firms may not be handling complaints properly.

Some firms were repeatedly turning down complaints and using arguments which appeared only slightly different to those used in earlier cases where the ombudsman had found in the customer's favour.

"Such behaviour is not in keeping with the spirit or letter of our requirements," said Mr Briault.