Could Plevin-type rules apply to endowment mortgages? 12 July 2018 at 7:50PM in Reclaiming mortgage fees, council tax, etc 1 reply 1.8K views

bigpat

My wife and I took out an endowment mortgage when we bought our first home in 1994. Some years later, due to warnings that endowments were underperforming, we dug deep into our finances, made a lot of sacrifices and converted to a repayment mortgage.

We filed a claim for mis-selling with the Financial Ombudsman and although they ruled that it HAD been mis-sold, they said we were due no compensation. (If I understood it correctly, their reasoning was that, in our case, the amount we had saved by making lower interest-only payments was equivalent to the expected shortfall. But that's a digression - sorry.)

I have no idea how much commission the "financial advisor" - i.e. SALESMAN!! - at that estate agency would have earned, but I just wonder whether there could be any scope for redress on that ground.

On an endowment policy which was designed/supposed to mature at £62,000 the commission will not have been anywhere near 50% I suppose, so presumably the Plevin case itself does not apply. But I wonder whether anyone has looked at what level of commission would have been "unfair" in cases like this.

dunstonh

Could Plevin-type rules apply to endowment mortgages?

short answer - no

We filed a claim for mis-selling with the Financial Ombudsman and although they ruled that it HAD been mis-sold, they said we were due no compensation. (If I understood it correctly, their reasoning was that, in our case, the amount we had saved by making lower interest-only payments was equivalent to the expected shortfall. But that's a digression - sorry.)

Basically, the calculation method compared where you would have been had you had a repayment mortgage vs the interest only mortgage minus the value of the endowment. In your case, despite you complaining, they found you were better off financially with the endowment mortgage and therefore no payment was necessary.

I have no idea how much commission the "financial advisor" - i.e. SALESMAN!! - at that estate agency would have earned, but I just wonder whether there could be any scope for redress on that ground.

Yes you did. 1994 rules included commission disclosure on the quote issued at point of sale and supplied again by the insurance company directly to you with the cancellation rights.

But I wonder whether anyone has looked at what level of commission would have been "unfair" in cases like this.

No need for them to look as it doesnt matter. Plevin came about due to a change in the law in 2006 which became effective in 2008 (section 104 of the consumer credit act). Plus, the FCA have already confirmed that it doesnt apply to any other insurance type other than PPI. Mainly as the Plevin case was about insurance built into the debt (added to the loan and charged interest on) and was optional. Very different to a standalone endowment policy that was required with an interest only mortgage.