Abbey National and endowments

Abbey National was fined £800,000 in May 2005 for mishandling mortgage endowment complaints and for providing the regulator with inaccurate and potentially misleading information regarding proper handling of mortgage endowment complaints.

The FSA said about Abbey National -

Between 1 October 2001 and 30 September 2003, Abbey 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 £19 million may have been caused to those 3,500 customers. During this period, the firm received 37,453 mortgage endowment complaints and, of the 20,044 cases it decided, it rejected 18,593 complaints (approximately 93 per cent).

Between 1 January 2001 and 31 December 2004, Abbey received approximately 65,000 mortgage endowment complaints. A detailed investigation of cases in every quarter of that 4 year period has not taken place. However, the firm accepts it is likely that levels of failure similar to those found between 1 October 2001 and 30 September 2003 occurred throughout the 4 year period.

In determining the level of penalty, the FSA has recognised that Abbey co-operated fully and quickly agreed the facts with the FSA so as to enable the settlement of the disciplinary case at an early stage. Abbey has also committed to remedying any consumer harm that it may have caused. The firm will review all mortgage endowment complaints rejected since 1 January 2000 and pay redress where appropriate and has launched a complete overhaul of its complaints handling procedures. Had Abbey not acted in this positive way, the FSA would have been minded to impose a far higher financial penalty.

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. Its failings were made more serious as they occurred at a time when there was a high level of awareness within the industry about mortgage endowments and concerns regarding the fair handling of complaints.

"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 wrote to the FSA in April and May 2002 stating that it was already applying advice outlined in the letter to CEOs from John Tiner. In fact, the FSA subsequently found that the firm had not properly applied three of the principles raised in the Tiner letter. This response was unacceptable and the FSA considers Abbey's conduct fell well below the standards it would expect of an authorised firm's communications with the regulator

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