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Industry to be rocked by endowment misselling scandal

The mortgage industry is set to be rocked by a huge endowment misselling scandal which could force lenders to fork-out millions in compensation.


The Treasury Select Committee believes there has been widespread misselling and is meeting on October 20 to finalise details of an investigation to determine the extent of the problem.


If the committee unearths evidence of widespread misselling it is expected the Treasury will ask the FSA to conduct a full review which could rival the pensions misselling review in terms of compensation paid out.


But it insists IFAs must not be made scapegoats for the problem. The FSA is currently carrying out &#34targeted visits&#34 to examine endowment sales processes.


ABI figures reveal more than three million endowments were sold between 1994 and 1998. The average mortgage is £60,000.


Treasury Select Committee member and Liberal Democrat financial services spokesman Vincent Cable says: &#34Lenders at times were recommending people took out endowments that were not always appropriate.


&#34A number of the committee members, including the chairman, are very concerned about this and believe it could be as big as the pensions misselling scandal.


&#34We will have to work out what will be the right way to compensate victims of misselling and find ways of making sure IFAs don&#39t take the brunt of this because in many cases they have been made a scapegoat.&#34


ABI press officer Malcolm Tarling says: &#34The insurance industry wants to ensure that anyone with an endowment mortgage has not been missold a policy. We have not seen any evidence to make us believe there has been widespread misselling.&#34

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