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FSA demands action over endowments

Press Association
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 endowment mortgages.

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 industry.

"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 very responsive."

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.

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