01/02/2004
The scale of the endowment mis-selling problem has been seriously underestimated, parliamentary watchdogs at the Treasury Select Committee were told last week.
According to figures given to the committee by the chief city watchdogs, the Financial Services Authority, around 3.5 million home owners will be unable to repay their mortgages on maturity. They will typically face a £5500 homeloan shortfall, leaving Britain looking at a £30 billion black hole over the next five or 10 years.
By comparison, MPs heard that the numbers who have claimed for mis- selling is small. The committee was told that, while estimates put at half the number of policies which were potentially mis-sold, insurance companies have typically received complaints of around only 6% of policyholders.
This led MPs to question whether customers are being given the right advice to solve their mortgage headaches. This is becoming a crucial issue because time for lodging a complaint is running out.
Claims for mis-selling must be made three years and six months after receiving a “red” mortgage letter warning of a serious risk of a shortfall. That deadline will approach later this year for some borrowers. Failing to complain in time will result in complaints being “time-barred” under limitation legislation.
MPs quizzed insurance bosses – including Legal & General’s David Prosser, Aviva’s Richard Harvey, Prudential’s Jonathan Bloomer and Standard Life’s Sandy Crombie – over why no information was given to customers about their right to complain for mis-selling in any literature dispatched by companies.
The Consumers’ Association is similarly furious that early information sheets from the Financial Services Authority did not include complaining about mis-selling as one of the options available to home owners. It argues that the FSA deliberately withheld information about the scale of the problem to inhibit policyholders from complaining.
In a letter to the CA’s head of campaigns, Louise Hanson, the former FSA chairman Howard Davies said: “Such information could provide an exaggerated incentive to complain, with no greater prospect of that complaint being upheld.”
Hanson told the Sunday Herald: “Here we are a few years later discovering that only a tiny number of those with potential legitimate claims have sought the compensation which is their fair due. There is no question of there being any ‘exaggerated incentives’ to complain. Quite the reverse. There has been a cover-up.”
Complete article here: Sunday Herald.
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