Lenders warned over endowment mortgages

Insurance companies have been warned they must inform homebuyers about compensation, and give people better knowledge of how to complain.

16:41 26 May 2004

Insurance companies have been warned they must inform homebuyers about compensation, and give people better knowledge of how to complain.

The warning came from the Financial Services Authority, as the chief executives of four large insurance groups were being attacked by the Commons Treasury Select Committee for their failure to provide information about the risks of endowment mortgages.

Endowment mortgage holders already face a shortfall of 40 billion, the Treasury Select Committee has claimed. If consumers were mis-sold a policy they have three years to complain after receiving a "red letter" from the insurers.

But this is set to change, with all insurers to be forced, from June 1st, to write to customers six months before the deadline to remind them of its imminent passing.

And, further pressure was put on insurers yesterday when the ABI said that all lenders must "introduce a new warning box containing extra information about how and when to complain". Added to this from June insurers will have to explain the use of inks other than red in the notation of a shortfall on the customer's letter.

FSA Retail Themes Director Anna Bradley has told Reuters that it is vital "that consumers who believe they were mis-sold their endowment policies are clear about the date their right to complain runs out."