Post payment compensation rejected by FOS

The Financial Ombudsman Service have established that Mortgage adviser firms who have consented to compensation for endowment mis-selling are not obliged to re-open the case even if the client returns after accepting that amount.

A recent publication of Ombudsman News reports the FOS get a "small, but not insignificant" sum of mortgage endowment complaints where the client makes a further complaint after accepting compensation previously from the firm.

For example, one case sited concerns a client who agreed to a full and final settlement from a firm; but subsequently attempted to ask the FOS to re-open the case. She had received a re-projection letter, stating the value of her policy had dropped further.

The customer had kept her policy, and used the redress money to pay off some of her mortgage. However, she should have used the compensation to redress the balance and put herself in a position she would have been in, had she initially taken out a repayment mortgage, and then surrendered the policy in favour of another type of mortgage. Consequently, the FOS turned down her complaint.

The FOS concluded she was aware of the risks of the policy when decided to keep it; therefore she was responsible for her own decisions and not entitled to compensation for further losses incurred.

In contrast, however, the FOS did uphold a decision to redress another client when the firm approved a deal then declined to pay.

The client in question had worked for a building society previously held an endowment policy for savings purposes, when the mortgage was taken out, later the firm discovered the advice given to invest in an endowment was acceptable after all.

The FOS recognises, since the firm had already entered a binding agreement it was then necessary to abide by it, so the firm was required to honour that agreement and pay a small sum of compensation for any distress and inconvenience caused.

Jun 28, 2005
Email this article


Previous Page