The Consumers' Association has lodged a complaint with the Treasury, accusing the FSA of failing in its statutory objectives of promoting public understanding and securing consumer protection during its handling of the endowment crisis.
The CA is also calling on the Treasury to intervene and establish an independent review.
The complaint follows the launch of the CA's 'endowment action' campaign eight weeks ago, designed to help the five million consumers who could have been mis-sold. Since its launch, 280,000 people have flooded to the campaign website for information on endowments mis-selling and 18,500 people have used the 'letter generator' to draft their complaint.
The CA also released findings last month revealing that a staggering 87% of endowment mortgage holders, who have received reprojection letters, are unaware that the FSA has a factsheet designed to help people make a complaint and only half of consumers who have actually made a complaint are aware of the factsheet's existence.
The CA's complaint addresses three areas:
Giving mis-leading advice – In December 1999 an FSA press release told the public that, on average, mortgage endowment holders had fared at least as well as they would have done with a repayment mortgage. This communication was repeated throughout 2000. This statement was misleading as it was based on what the CA believed to be manipulated calculations, which did not correctly reflect the up-front charges on endowment mortgages.
Taking inadequate action/failing to act – In its progress report, the FSA acknowledges that firms had mis-sold mortgage endowments to consumers and that millions faced shortfalls. Despite this, says the CA, the FSA has failed to take effective action to raise consumer awareness, inform surrendered policyholders and deal with the problems that arose from those reprojection letters which encourage policyholders to increase premiums. The CA believes that 1.9m consumers may have surrendered their mortgage endowment prior to spring 2000, when reprojection letters were first sent out. Though these people are just as likely to have been mis-sold they have never been contacted or sent a fact sheet because the FSA's communication focused on shortfalls not mis-selling.
Acting with avoidable delay -The FSA, to date, has failed to put out any clear communication alerting the five million consumers who may have been mis-sold to the imminent deadline for complaining to the Financial Ombudsman about mis-selling. The CA is calling on the FSA board to decide in favour of extending the deadline for complaining to the Ombudsman by a year. It has also asked the Government to force the FSA to take tougher action to help the millions of consumers who could have been mis-sold an endowment mortgage.
CA director Sheila McKechnie says: “The fact that over a quarter of one million consumers have flooded to our website in just eight weeks proves to us that the FSA has fundamentally failed in its duty to inform and help consumers who have been mis-sold or who have a shortfall. Last week the Treasury Select Committee described Howard Davies and his team as 'asleep on the job.' In the case of endowments it appears to be one of 'asleep off the job'.
“The FSA's track record on mortgage endowments represents a series of failures, mistakes and omissions. With only a few weeks left for many consumers to complain, the FSA can no longer afford to bury its head in the sand. In taking our complaint to the Treasury today, we hope to catalyse the Government and the FSA into action to ensure that every person in the UK who is entitled to redress gets it.”