The FSA is to be forced to name and shame the 12 endowment mortgage providers which misused Lautro projections in setting premiums, meaning consumers were given unrealistically high maturity figures.
The Information Commissioner’s Office has upheld a freedom of information request to name the 12 firms, suggesting the revelation would highlight the ongoing issues surrounding endowments and question the legitimacy of time-bar rules.
The estimated number of policies affected could be in the hundreds of thousands, depending on the providers involved. The FSA has so far refused to name them, claiming that it would affect future informal reviews, damage market confidence and infringe the providers’ rights.
The FSA conducted an informal mortgage endowment review in 2001 which found that between 1988 and 1994, 12 providers used standard Lautro charges to set premiums without informing consumers that their actual charges were higher. This meant consumers would need to pay higher premiums to meet their expected maturity figures.
The regulator said that the providers had “breached a contractual warranty and/ or of material pre-contractual misrepresentation in the sale of endowment mortgages”.
It says that as the providers agreed to compensate victims, they did not need public censure. In 2000, Royal Scottish Assurance was fined £2m, becoming the only provider to be penalised for endowment mispricing.
IFA Defence Union chairman Evan Owen says: “The providers’ dirty washing needs to be aired. How many complaints against advisers have been triggered by shortfalls which have been based on complete fiction?”
CMS Cameron McKenna partner Simon Morris says: “This could have dangerous implications in terms of fut-ure industry willingness to co-operate with informal FSA work. We do not want to repeat the US Securities and Exchange Commission situation, where constructive informal dialogue is virtually impossible.”
Compliance consultant Adam Samuel says: “The commissioner clearly disliked the FSA’s way of conducting enforcement business behind closed doors. He is right. Public accountability is valuable as it helps regulators resist the temptation to make inappropriate compromises.”
The FSA says it is considering its response.