Allied Dunbar and endowments

Allied Dunbar has been fined £725,000 for serious flaws contained in its procedures for handling mortgage endowment complaints, which exposed a large number of its customers to potential loss, said the FSA in March 2004. The flaws identified occurred between May 2001 and April 2003.

The firm is now voluntarily reviewing complaints rejected from January 2000 and April 2003, including around 1,000 endowment complaints that were rejected during the period of breach and which in practice is the number of customers who may have suffered loss.

Allied Dunbar has sold 293,522 mortgage endowment polices since 29 April 1988.

Important parts of the firm's guidance issued to its staff on the operation of its complaint handling procedures were inadequate. In a number of the complaint cases examined by the FSA complaint handlers had conducted poor quality investigations and there was a failure to gather sufficient evidence to make a fair assessment of both the consumer's attitude to the risk and the suitability of the sale.

The FSA said specific failings in the procedures and handling of mortgage endowment complaints by Allied Dunbar included:

• Not giving clear instructions to complaint handling staff about the types of evidence they should consider (e.g. statements from the original sales adviser, point of sale documents, the customer’s version of events)
   
• Not giving clear instructions about the weight to be attached to the types of evidence in coming to a decision
   
• A guidance update issued to complaint handling staff in June 2002 contradicted guidance set out in a letter from the FSA that had been issued only some two months previously. The update restricted complaint handlers’ ability to uphold a complaint where the sale was plainly unsuitable, if for example the customer did not complain specifically that the sales adviser failed to explain the risks of an endowment policy
   
• The complaint handling systems, including management information systems, produced inadequate information to identify risks of regulatory concern, particularly given the volume of endowment complaints received from 2002 onwards
   
• In a number of the complaint cases examined by the FSA, complaint handlers conducted poor quality investigations, failing to gather sufficient evidence or to make a fair assessment of that evidence, and may therefore have made unsound decisions to reject complaints
   
• An assumption that a pre-existing endowment, or other investment held at the time of sale, was sufficient evidence that the customer had an understanding of the risk associated with the product
   
• A tendency to give disproportionate weight to sales advisers’ versions of events when assessing the facts surrounding the consumer's complaint.

The FSA said Allied Dunbar has introduced new complaint handling procedures and it will complete its review of all complaints rejected since January 2000 by April 2004. Customers who have suffered a loss as a result of a mis-sale will be compensated.

You can see the full FSA announcement here. You can also search our message boards for experiences of Allied Dunbar.