The FSA has fined Guardian Assurance plc and Guardian Linked Life Assurance Limited (Guardian) £750,000 for "serious systemic flaws in its mortgage endowment complaints handling procedures" and for not drawing the problems to the attention of the regulator.

The FSA said -

In January 2003, Guardian introduced new procedures that were neither appropriate nor effective in terms of ensuring that mortgage endowment complaints were fairly and adequately investigated. The failings continued until December 2004, exposing the 5,600 customers whose complaints were rejected during the period to the risk of financial loss. Guardian failed to properly identify and remedy these problems, and did not notify the FSA about its concerns over the risk they posed to the fair handling of customers' complaints. Instead, the matter came to the FSA's attention during a visit in late 2004 as part of its ongoing work with the industry on mortgage endowment complaints handling.

Guardian was aware in advance that the changes it made to its procedures would be likely to significantly reduce the proportion of complaints which it upheld, and, following their introduction, the firm's uphold rate fell from 71 per cent in the second half of 2002 to 22.6 per cent of complaints in the first half of 2003. There was also a significant increase from April 2003 onwards in the proportion of complaints the firm rejected which were subsequently upheld by the Financial Ombudsman Service (FOS). While Guardian made changes to the procedures from March 2004 onwards (and by the third quarter of 2004 the firm's uphold rate had increased to 61%), significant procedural deficiencies continued throughout the period.

In determining the level of the penalty, the FSA recognised that Guardian has committed to remedy any customer loss that may have arisen from their inappropriate procedures through a review of rejected complaints, and has assured the regulator that customers will be properly compensated where necessary. Guardian co-operated fully with the regulator's investigation and showed a willingness to promptly and efficiently settle the matter. Without these actions, the FSA would have been minded to impose a more substantial financial penalty.

Which? commented -

The behaviour of Guardian has demonstrated contempt for both its' customers and the regulator.

It appears they deliberately introduced complaints handling systems that would treat their customers unfairly. Furthermore, they then acted irresponsibly by not alerting the regulator when the systemic problems became clear to them.

Which? is surprised by the FSA's decision to reduce the fine they imposed. Given the breathtaking actions of Guardian, the regulator should have made a real example of this company and imposed a record breaking fine for poor complaints handling.

If the FSA is serious about getting companies to treat their customers fairly it must make examples of companies that treat their customers
with such blatant disregard.

But Which? are only scratching the surface.

The firm upheld 71% of complaints in the second half of 2002 but only 22.6% in the first half of 2003. This should have alerted the FSA, but they say they only picked it up late in 2004. And since then the whole of 2005 has gone by before finally consumers are told.

The fine on The Guardian is certainly too small. But the FSA also has serious questions to answer about lethargy in protecting consumers and keeping them informed.