FSA fines Abbey £800,000 for endowment failings

(Update with Abbey's response) The Financial Services Authority (FSA) has fined Abbey National £800,000 for mishandling mortgage endowment complaints and accused the bank of putting its own interests ahead of customers.

The regulator says Abbey rejected thousands of genuine complaints from endowment mortgage holders and provided it with inaccurate and potentially misleading information. The bank wrote to the FSA in May 2002 saying it was applying the regulator’s principles for dealing with endowment complaints when in fact it was not.

The FSA says the fine would have been far higher had Abbey’s new owner Banco Santander of Spain not reacted quickly to ensure no losses by its endowment customers.

The FSA found that between 1 October 2001 and 30 September 2003 Abbey mishandled around 5,000 complaints, including 3,500 that were rejected when they should have been upheld.

The FSA estimates that, based on industry averages, those 3,500 customers may have suffered losses of up to £19 million.

During this period, the firm received 37,453 mortgage endowment complaints and, of the 20,044 cases it decided, it rejected 18,593 complaints around 93%.

Clive Briault, the FSA's director of retail markets, said: ‘By putting its own interests ahead of those of its customers with a mortgage endowment complaint, Abbey has singularly failed to treat its customers fairly. Its failings were made more serious as they occurred at a time when there was a high level of awareness within the industry about mortgage endowments and concerns regarding the fair handling of complaints.’

Abbey accepted that its complaints handling procedures for mortgage endowment complaints had been inadequate. It is reviewing 50,000 cases it rejected and will write to these customers by 22 June. This excludes those cases that have gone to the Financial Ombudsman. The review only includes previous complaints about policies that Abbey sold and advised on, such as Abbey National Life. Scottish Mutual and Scottish Provident endowment policies were sold through independent financial advisers. Abbey said any complaints about these policies should be addressed to the firms that sold them.