Act now on mis-sold endowments: new article

mayb_2

This is all so confusing to someone who has had no financial dealings with this sort of thing and it should be mandatory surely, that the company gives all of the explanations and some advice of possible ways of financing the mortgage. As turbobob pointed out - not everyone is aware that they need to make some other arrangement to cover possible shortfalls. In some ways it is even more difficult if the company is performing well at this point in time, as there is no guarantee this will continue to be the case. Do those who continue with their endowment realise that they are still involved in a risk taking exercise - they probably know no more about this now then they did at the beginning so are not best placed to judge the security of their mortgage.

Chamois

Thanks for all of your advice! £15k was the worst case scenario and since we only took out our 25-year policy in 1999, it will be a while before we find out what will actually happen. To be on the safe side we have converted part of our mortgage to repayment and also made regular overpayments.

To be honest, we were pretty much against taking out an endowment in the first place since we had heard some negative press about them but we allowed ourselves to be persuaded to do so. This was our first mortgage and we were rather naive I'm afraid - something which I'm now hoping to rectify with the aid of this very useful site.

Thanks again!

Mr_helpful

mayb wrote: »

This is all so confusing to someone who has had no financial dealings with this sort of thing and it should be mandatory surely, that the company gives all of the explanations and some advice of possible ways of financing the mortgage. As turbobob pointed out - not everyone is aware that they need to make some other arrangement to cover possible shortfalls. In some ways it is even more difficult if the company is performing well at this point in time, as there is no guarantee this will continue to be the case. Do those who continue with their endowment realise that they are still involved in a risk taking exercise - they probably know no more about this now then they did at the beginning so are not best placed to judge the security of their mortgage.

Additional literature has been given out for donkeys years with mortgages and endowments but what is the point when one is up against the fact that no one seems to be able to read and then suffers from selective memory.

mayb_2

I actually rang my lender for advice when I was first told of a possible (huge) shortfall in my mortgage Mr Helpful. The advice I received was to increase my payments to them and this would ensure that my mortgage was covered. I took this advice and then found the following year that my mortgage shortfall had grown even larger.

I don't think it is possible to find that people have been missold their mortgages and then expect them to understand what has happened to them and why. If they had had such understanding they would not be in this position.

The literature that arrives with the mortgage update does not explain why the situation has occurred and the customer will be none the wiser which is the best action for them to take by reading it. They will be told the choices but not advised about the whys and wherefores of the situation. They will be angry,confused and upset and actually the simple answer is that they are in the poo and there is not a cheap and easy solution to it. They have lost money and don't become wiser because the mistake was not theirs in the first place.

Advisors are expected to give sound advice and if that proves to be wrong well why would anyone go back to them for more of it? The customer goes to a mortgage or finance advisor because they do not understand the financial markets and need someone to help them make the necessary choices to secure their financial future. Giving paperwork with the bad news is just shifting the responsibility to those least able to take the decision.

It is like a consultant asking you what treatment you would like to choose for your life threatening condition. You expect the consultant to be making that decision and no amount of paperwork, however worded is going to help you make that for yourself.

It has been my personal experience - and I know I am not alone - that financial advisors have the most selective of memories when it comes to deciding what happened at the point of sale.

It was not the consumer's fault that the financial big guys created the disaster of the sub prime mortgage - which has directly lead to the current financial situation and the increase in those defaulting on their mortgages, and the credit crunch which is hitting everyone now. I am sure in the future this will also become the fault of stupid consumers who don't know what they are doing. We haven't seen the end of this disaster yet and it can be laid at the door of the salesman mentality that has been growing and flourishing in the banks and financial institutions. Short term thinking leading to long term problems.

johnmacleod

hi can anyone help me,

in 1987 i took out an endownment morgage with the standard life, over the past 2 / 3 years i have tried twice to claim compensation for mis-sold endownment due to a short fall at the end of the term, i was not told at the time that the policy profits could rise or fall, i was just told that at the end of the term there would be money to pay of the morgage and money left over.

standard life have told me that because the policy was taken out in 1987, it was past the cut off date which it was 1989.

is this true, or, is there still a chance i can claim compensation?

johnmacleod

dunstonh

is this true, or, is there still a chance i can claim compensation?

Regulation came into effect 29th April 1988. If you bought before that date and used anyone other than a standard life representative then you cannot complain. Plus, its not standard lifes responsibility either as they never sold it.

If you bought from a standard life rep then you can complain.

If you bought direct or execution only, such as when Which? recommended Standard Life endowments then you have no right to complain.

mayb_2

I shouldn't imagine that it particularly matters what the Which magazine was advising at the time of the sale jophnmcleod and I was sorry to read of your problems with Standard Life. The issue at stake here is whether you understood that your endowment may not pay off your mortgage when you purchased it. It would appear that you had no advice during the course of your endowment as to how it was performing. I would be tempted to challenge the company about that lack of advice and, if you think it worth the bother, complaining to the FSA and ask for their advice. These companies will never take responsibility if they can find a loophole in the regulations that allows them to escape it.

Follow this link to a comprehensive guide to your options johnmcleod and I certainly wouldn't rule out complaining to the Ombudsman. Good luck whatever you chose to do.
http://www.guardian.co.uk/business/2005/jan/21/endowments.money1


Are you saying here dunstonh that if you bought your endowment before a certain date, the company was not obliged to comply with more recent regulations since that time? Did they not have to send out letters saying that the mortgage may not be on target, in order that those in possession of them could consider their position.

No wonder the FSA is in the poo now about their lack of accumen and ability to address the serious issues they are meant to be policing.

I was particularly interested to hear a company say last night, that they did not have to give information to the FSA only answer questions directly put to them by the FSA. So all of you with a problem that you hope the FSA might be dealing with - perhaps you should ask to see which questions were put, in order that your problem was thoroughly addressed. If they don't ask the questions they wont have to deal with the answers.

turbobob

mayb wrote: »

Are you saying here dunstonh that if you bought your endowment before a certain date, the company was not obliged to comply with more recent regulations since that time? Did they not have to send out letters saying that the mortgage may not be on target, in order that those in possession of them could consider their position.

No wonder the FSA is in the poo now about their lack of accumen and ability to address the serious issues they are meant to be policing.

The rules prior to 29 April 1988, which is the date the Financial Services Act 1986 came into force, were different. This is also the date the Securities and Investments Board (predecessor of the FSA) came into being. It's sometimes referred to as "A Day". Essentially, before this date sales of financial products were unregulated. The sale would still have to comply with other laws such as contract law. But the specific requirements of the Act (for example, the requirement to "know your customer" which is usually done by completing a fact find) did not apply.

Its quite complicated, but most of the large firms have (as far as I know) signed up to voluntary jurisdiction with FOS on pre A Day sales. This means, more or less, that they have to investigate these complaints as if they were sold after 29 April 1988. There is some more information about FOS dealings with Pre A Day complaints here - http://www.financial-ombudsman.org.uk/publications/ombudsman-news/14/feb-pre-aday.htm

This means if it was sold by an insurance company rep (or I believe, most banks or building societies) then they are liable to investigate the complaint. If it was sold by someone other than this then there is no obligation for the person or company to investigate. Basically, almost anyone could sell an endowment policy pre A Day, as there was no requirement to be authorised to sell. I think many firms set up agencies with insurers to sell policies as a side line to their main business - builders, surveyors, estate agents etc.

This is nothing to do with the projection letters you are referring to. All insurance companies are required to send these every couple of years on mortgage endowments regardless of who sold the policy.

mayb_2

So what you are saying turbobob is that johnmcleod should have received the projection letters. That being the case if he didn't receive them (I didn't receive mine from the CIS) this is a complaint for the FSA. Let me tell you now they will cover up for them as I know to my cost.

JVA

Hi

I feel a bit naive posting this but until I subscribed to Martin's site I wasn't aware that you could try to claim on your endowment. My partner and I took out our endowment in Jan 1989, for a £31,500 mortgage. We believed the salesman when he told us that our policy would make more than the mortgage of £31,500, and that we could look forward to a bonus. No mention was made of the possibility of a shortfall. We were very young and knew no different. Problem is that we have no paperwork to back this up. Also I haven’t any of the letters sent out originally by Phoenix warning us that there would be a shortfall. I thought it was just too bad for us and that we had no come back. I have a nasty feeling that this is a lost cause but I would really appreciate some advice. I’ve tried to access the Which Endowment Action pages but Internet Explorer keeps reporting that there is a problem with the site. Anyone else having this difficulty?

Many thanks