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£675k penalty for Friends over endowment failures

The FSA has fined Friends Provident £675,000 for systemic failures in the handling of its mortgage endowment complaints.

A visit to Friends&#39 offices by the FSA revealed that the company&#39s mortgage endowment process was using procedures that were biased against customers.

The regulator says that, out of a total of 21,788 complaints processed, about 5,500 customers had their complaints rejected because of procedural unfairness.

The FSA accused Friends of a readiness to dismiss customers&#39 evidence and an assumption that the holding of another endowment meant that the customer understood risk.

It was decided that a strong financial penalty was required because systemic weaknesses in Friends&#39 procedure exposed a big number of customers to potential loss.

The penalty relates to procedure failures between October 2001 and February 2003.

FSA director of enforcement Andrew Procter says: “Firms should be under no illusion as to the standards expected in relation to complaints handling. We will not tolerate poor systems which expose consumers to the risk that genuine complaints, which may deserve compensation, are rejected unfairly.

“Friends Provident and its senior management failed to respond in an effective and timely manner to FSA guidance and to correct problems found in its systems when it had reasonable opportunity to do so.

“It is a firm&#39s responsibility to ensure that its practices are fair and we will continue to monitor firms&#39 complaints handling. Firms found to be failing their customers face regulatory action.”

Friends spokeswoman Di Skidmore says: “Our complaints handling process did not meet the expectations of the regulator and Friends Provident regrets what has happened.”

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