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FOS overwhelmed by endowment mortgage mis-selling

Date: Thu, 28 Oct 04 Analysis

The Financial Ombudsman Service is being buried by complaints over the mis-selling of endowment mortgages.

The FOS has said that banks are avoiding dealing with complaints themselves, seeing the number of problems being dealt with by the FOS climb by 40 per cent to an expected 70,000 this year, and seriously delaying the amount of time taken to solve the issues.

In the 1980s millions of consumers were sold endowment mortgages, which they were told would mature and pay off their mortgages as well as probably delivering a surplus.

The under-performance of the stock market since then means that many people are left a shortfall between the value of the loan and the value of the endowment policy. If this risk was not fully explained (as was the case in an estimated 80 per cent of cases at one point) consumers are entitled to compensation from the institution that sold them the policy.

FOS spokesman David Cresswell said: "For every 100 endowment complaints made to some companies, 20 are reaching us: this should not be happening.

"With other financial products we get two or three complaints for every 100 made to the company."

The body added that cases were now taking much longer to clear: "Normally, we would expect to complete 45 per cent of cases within three months, 70 per cent within six months, and 80 per cent within nine months, but with mortgage endowment complaints, we are probably taking around three to four months for a case to be allocated."

The sudden increase in workload has prompted a recruitment drive by the FOS which is to hire an extra 100 people, doubling its headcount to 950 by the end of the year.

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