demands action over endowments
Tuesday December 2, 2003
The financial services industry was today ordered by the city watchdog
to "clean up its act" in the wake of the scandal over mis-selling of
John Tiner, chief executive of the Financial Conduct Authority (FSA), said he wanted to see action at the
"coalface" to ensure a fair deal for customers across the whole
"I think that the financial services industry as
whole, not just the insurance industry ... has a huge responsibility
here to clean up their act and to make sure that they put the customer
at the heart of their operations in a real way," he told the House of
Commons Treasury select committee.
"What I say to chief executives is: I don't want to
just hear nice words from them about treating their customers fairly. I
want to see it converted into real things that happen at the coalface."
Mr Tiner's remarks came after criticisms from MPs
and consumers groups about the way the FSA has handled the scandal of
mis-selling and the problem of shortfalls in endowment mortgages.
Former minister Angela Eagle (Labour, Wallasey)
compared the problem with the privatisation of the railways. "There is
a great big mess going on down the track and everyone is denying
responsibility," she said.
But Mr Tiner said he believed that the FSA had
acted responsibly and it had been "anything but complacent". He said:
"Our responsibility in relation to those consumers that have been
mis-sold and mistreated are very clear and very definable and I believe
that we have in the past and are continuing to act in a way which is
He said the FSA has secured £800m in
compensation for 500,000 consumers.
Under questioning from MPs, he said there had been
"significant" mis-selling of endowment mortgages, but not on the scale
of the pensions review.
"I do not think there is evidence that it is
absolutely systematic, but it is very significant; I am not trying to
down play it," he told MPs.
He further warned that the number of "red" and
"amber" letters sent out to people holding endowment policies could
rise from around 50% to as high as 70% this year.
Under the arrangements, consumers are warned if
they have red letter that there is a "very, very strong" possibility of
a shortfall. Those with an amber letter are warned that there is a
possibility of a shortfall.