Abbey fined £800,000 for mishandling complaints

Fiscal watchdog, Financial Services Authority (FSA) has fined Abbey National plc £800,000 for mishandling complaints relating to mortgage endowment policies.

The Abbey was also taken to task by the FSA for providing the regulator with "inaccurate and potentially misleading information" in its response to a letter to CEOs, from then FSA Managing Director John Tiner, regarding proper handling of complaints.

The FSA found that, between October 2001 and 30 September 2003, Abbey had mishandled around 5,000 complaints, including 3,500 that were rejected when they should have been upheld. The FSA calculates that based on industry averages, losses of up to £19 million may have been caused to those 3,500 customers. During this period, the firm received 37,453 mortgage endowment complaints and, of the 20,044 cases it decided, it rejected 18,593 complaints, which was 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 would certainly have been in line for a far higher fine had its new owners not acted immediately to ensure that no customers would face loss as a result of its mishandling of complaints. By agreeing to review complaints it has rejected, and by committing to revise its entire complaints handling procedures, Abbey has taken positive steps to prevent its past mistakes in this area being repeated in the future."

Between 1 January 2001 and 31 December 2004, Abbey had received approximately 65,000 mortgage endowment complaints. While a detailed investigation of all cases in this four year period has not taken place, the firm accepted it was "likely" that levels of failure similar to those found between 1 October 2001 and 30 September 2003 had occurred.

Setting the fine, the FSA noted that Abbey had co-operated fully and quickly agreed the facts with the FSA so as to enable the settlement of the disciplinary case at an early stage. Abbey has also committed to remedying any consumer harm that it may have caused.

The firm will review all mortgage endowment complaints rejected since 1 January 2000 and pay redress where appropriate.

Avoiding a far higher financial penalty, Abbey has commited to a complete overhaul of its complaints handling procedures.

(SP/CD)