Click Below to sell your Friends Provident Endowment Policy .
The Financial Conduct Authority (FSA) has fined Friends Provident Life and Pensions Limited £675,000 for failures in its procedures which led to the miss-handling of mortgage endowment complaints. The failures were identified following a visit by the FSA. The firm is now voluntarily reviewing all endowment complaints that were rejected between January 2000 and 10 February 2003. Independent accountants have been appointed by Friends Provident to oversee this process.
Friends Provident received 21,788 mortgage endowment complaints between March 2000, when its dedicated complaints handling team was established, and February 2003, when its defective procedures were replaced. Approximately 5,500 customers whose complaints were rejected were exposed to the risk that their complaints were in fact genuine and deserving of redress, but were rejected because the procedures were inherently not fair and were biased against customers.
The firm's failures persisted from October 2001 until February 2003. These failures demand a significant financial penalty as they arose from a systemic weakness in the firm's procedures and exposed a large number of customers to potential loss.
The FSA has also placed great emphasis on the importance of adequate complaints handling systems. To reinforce this point the regulator has, since 1999, issued substantial guidance and updates on mortgage endowment complaints handling, including detailed guidance in a letter from John Tiner, then Managing Director of the FSA, in April 2002.
Specific failings in the firm's procedures and its handling of mortgage endowment complaints included:
Andrew Procter, Director of Enforcement said:
These failings have, however, been mitigated significantly by the co-operation demonstrated by Friends Provident and the remedial action taken as a result of the FSA's action, including:
These procedures should ensure that mortgage endowment complainants will be offered redress where appropriate and that past mistakes are not repeated.
Notes for editors
The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.
Winterthur Life UK, a unit of the Swiss banking giant Credit Suisse, has been fined £500,000 by the UK's financial watchdog for miss-selling endowment mortgages.
It is the first fine for endowment mis-selling that the Financial Conduct Authority (FSA) has imposed.
Winterthur has been ordered to pay the £500,000 fine as well as costs of £57,000 to the City regulator under a ruling announced on Tuesday.
Winterthur must pay total compensation of £10m to eligible customers.
About 10,000 policyholders, who were sold mortgage endowment policies between March 1998 and December 1999, should be in line for a payment.
While the FSA has taken action over endowments in the past, these have been restricted to pricing issues.
The FSA has also launched probes into a number of other companies.
Decisions will be expected in the near future - and even bigger fines can be expected, pensions experts say.
Winterthur stopped selling endowment policies in July 2000.
The problems relate to a system called Winteract, a computerised sales system which was used by Winterthur's advisers between March 1998 and December 1999 to generate recommendations for customers.
Its computerised questionnaire, known as the "Attitude Survey", was designed to establish a customer's attitude to risk.
But the FSA found major failings with the use of the system, including the fact that customers were not provided with a "clear written explanation of the reasons why a recommendation had been made".
Winterthur had also failed to monitor how suitable the recommendations generated by the Winteract system were for clients and did not monitor its staff properly.
Policyholders who have surrendered their policies could also be in line for compensation under the terms of the ruling.
Customers with policies that are affected will be contacted over the next 24 weeks by Winterthur.
Carol Sergeant, managing director for Regulatory Process and Risk at the FSA said: "Where consumers have suffered loss we want to see firms act quickly and decisively to put things right.
"The level of fine here reflects the fact that Winterthur has dealt with this problem quickly, openly and co-operatively."
Winterthur Life has set up a help line on 0800 1380290. It is open from 9am to 5pm, Monday to Friday.