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Davies defends FSA&#39s endowment role

FSA chairman Howard Davies has written to the Consumers&#39 Association defending its handling of the endowment crisis and repeating there will be no full-scale misselling review.

The letter, dated June 5 2001, says it would not be right to identify the worst-performing companies, claiming “such information could provide an exaggerated incentive to complain”. It adds that legal reasons prevent the regulator from disclosing the records of individual firms.

The one CA point the FSA accepts concerns potential misuse of funds to pay redress. It says: “We do not believe the current rule, allowing proprietary life offices discretion on how they fund fines, is fair to policyholders.”

It says it is consulting on new rules which would stop companies paying out of the with-profits fund.

Davies says the admin costs of a review on the lines of the pension review would be £5m and this would be disproportionate given the lower percentage entitled to redress. The FSA says there have been 100,000 mortgage endowment complaints – 1 per cent of policies – of which a third have been upheld, with an average redress of £3,000.

CA campaigns and corporate communications director Allan Asher reacted with disappointment to the FSA letter. He says where the FSA has investigated, 20 firms have compensated 218,000 policyholders with sums totalling £315m.

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