Scottish Amicable fined for mortgage endowment mis-selling

It may grind slow but it mills small…the FSA has fined Scottish Amicable £750,000 for mis-selling mortgage endowment policies and systems and controls weaknesses in its sales area across the year 2000. A PIA visit in January 2001 discovered that the firm and its senior management had not taken adequate steps to act on guidance in RU72, issued in December 1999, that detailed the regulator’s expectations about firms’ disclosure practices regarding charges and risk and the need to ensure the suitability of mortgage products. Systemic sales process failures were identified; advisers did not “place appropriate emphasis” on establishing if customers were willing to take on the risk that an endowment policy might not cover their mortgage. As a result the firm was obliged to employ external accountants to review a sample of sales by its appointed representatives, which led to a review of 33,781 policyholders between January 1999 and February 2001; £11 million has been provided against associated compensation payments. Scottish Amicable has also undertaken to pay redress to current mortgage endowment policyholders who were mis-sold by appointed representatives between 29 April 1998 and 31 December 1998. Commenting on the penalty, Andrew Proctor, Director of Enforcement at the FSA, said, “The issues relating to mortgage endowments were well known in the industry towards the end of 1999 and the firm should have acted quickly and effectively on our guidance.”