Friday, February 24, 2006
Endowment Mortgage Mis-Selling Part 3.
The offer of compensation came today, I've not seen the letter, Mrs C rang me at work to let me know. It's a significant sum. Well, over £2,000 anyway. I'll have to check their calculations, to see if they followed the correct formula, when I get home.
The Building society are offering to reduce our mortgage by the amount directly, but I'm not sure if that is the best route to take at this stage, I'll have to think about it, as we could be penalised, if we over pay by more than £500 per month, under the conditions of mortgage, which was reviewed last year. I need to check with the society to see if the penalties would be applied in this case.
The Building society are offering to reduce our mortgage by the amount directly, but I'm not sure if that is the best route to take at this stage, I'll have to think about it, as we could be penalised, if we over pay by more than £500 per month, under the conditions of mortgage, which was reviewed last year. I need to check with the society to see if the penalties would be applied in this case.
Wednesday, February 22, 2006
An Extra Reward
Back In January I told you about my unexpected pay rise. Well the rise wasn't the only sweetener we got this year, to top bods, from America, turned up on a site visit late last month and handed everyone a letter, that's about 6 of us. Now, the last time we were handed a letter by a bunch of visiting Americans, 40 out of 50 staff based in Manchester were made redundant. This time the letter was the bearer of good tidings, the chairman was so made up with the work we'd done, not only did he approve an unheard of pay rise, but he'd approved a £1,000 bonus for all the staff who had worked on the project.
Of course there is always a down side to these things, it's in the shape of being on call about 1 week in 4. OK we get paid to be available to provide support and stay sober, but it does rather mess things when you value your social life more than work. Which is something I endorse entirely, valuing your social life that is. I work to live not live to work, which some managers find a to be a hard concept to grasp.
Of course there is always a down side to these things, it's in the shape of being on call about 1 week in 4. OK we get paid to be available to provide support and stay sober, but it does rather mess things when you value your social life more than work. Which is something I endorse entirely, valuing your social life that is. I work to live not live to work, which some managers find a to be a hard concept to grasp.
Tuesday, February 21, 2006
A Surprise
She doesn't know it yet but I've just booked three nights here for Mrs C's 50th birthday later this year. The booking doesn't actually fall on her birthday as my step-son is getting married too close to that weekend for us to take a break then. Now all I have to do is find a suitable present for her, and sort out a bit of a surprise birthday bash for the actual day.
Monday, February 20, 2006
Endowment Mortgage Mis-Selling Part 2.
It took the Building Society a little while to get back to us, but on 18th January we received their decision. It came as no surprise to us that they refuted our claim that the mortgage had been mis-sold and a 4 page letter explained in detail why they thought it was inappropriate to uphold our claim. I won't type out the document word for word but will briefly cover their main points:
1. They claimed we would have been shown an illustration for the policy which told us about premiums and growth rates, using rates recommitted by LAUTRO. They claimed that it was clear from the illustration that their could be no guarantee regarding maturity values. The rates reflected market rates at the time and the drop in those rates to today's values could not have been foreseen at that time.
2. We had dependent children and the mortgage was suitable as the policies would have paid off the mortgage and given the children security if we had died.
3. They gave/showed us other options and the choice was down to us.
4. Fees payable were not discussed but this was not a requirement until 1995, (I'll give way to them on that one)
5. We had both held endowment policies before and therefore could have utilised our existing knowledge to realise that there were no guarantees regarding performance.
6. Holding endowment policies before would have swayed our decision to choose another endowment policy and enabled us to make an informed decision.
In conclusion the investigator couldn't agree that we didn't have all the facts to hand, nor were we not aware of the risks involved with the policy. They also added that the illustrations and documents provided would have shown that the figures were only estimates and not guaranteed, nor had they seen anything in the information they had to the contrary.
They then went on to explain how to take any further complaint to the Financial ombudsman and included the appropriate leaflets, and ended by say that they realised we would be disappointed with the outcome, but that they had concluded a full and fair investigation into the matter.
As I said above the outcome didn't surprise me, they weren't going to give in without a fight. What did surprise me though was the wording used in a number of paragraphs in their reply. I initially thought that they may have given me some ammunition to use against them if I wanted to take it further, so I left it for a week or so, whilst I thought about their points. I then asked someone at work to read the two letters, mine and theirs, to see if he thought the same way as I did. It turned out that he did and he picked up on a couple of point that I had missed, so with this in mind I composed a reply to the Building Society, giving them a chance to resolve the issue before I went to the Ombudsman.
That reply letter went out via recorded delivery on the 1st February and follows here:
Reply To Refusal To Uphold My Complaint:
RE: Complaint concerning advice received on endowment mortgage
Endowment policy number: ..........
Mortgage reference number: .......... (Redeemed 1999)
.......... (Current)
In response to your letter dated 17th January 2006, your reference ...........:
I will iterate the first paragraph of my letter of complaint dated 27th November 2005:
I am writing to you to make a complaint about the way I was sold my mortgage endowment policy. I believe, for the reasons set out below, that I was mis-sold this policy and am requesting you to investigate the sale. I am also requesting that you send me a copy of my endowment file so that I can see all the documentation you have relating to my case.
You have yet to send me the requested copy of my endowment file, which as you know I am entitled to see. I will therefore make the request again: Please send me a copy of my endowment file so that I can see all the documentation you have relating to my case. I will give you until 9th February to comply with this request; otherwise it must be assumed that you do not hold any documentation on which to base any of your decisions in refusing to uphold our complaints. TIME IS OF THE ESSENCE.
In addition to this I must point out that you have made a number of assumptions in your letter that are not relevant to the facts:
You say that a number of illustrations were given to us regarding the potential growth rates for our policy and these would have made it clear that no guarantee could be made on the actual maturity value as it depended on the return actually achieved. The fact is that the illustrations were over inflated to illustrate the policy maturing with profits; there was no mention or no sign of any illustration showing a shortfall. You cannot just assume that a potential client understands the implications of over inflated rates. In order to ensure understanding it must be clearly explained that there is a potential that a policy may not meet the target amount. This did not happen at any point during any interview that we had with your advisor. Making assumptions about understanding is not establishing the facts about what is actually understood.
You say in your letter that the downturn in the economy and reduction in rates could not have been foreseen at the time the policy was sold. If your building society, who we would assume were experts in finance, could not see such a downturn in the economy and, in turn, indicate to us the danger of a shortfall, then how could we understand the implications that a policy would not meet the projected target amount? This would indicate that we were not given the full facts during the selling process; again this to me indicates mis-selling took place.
Another point that you indicate is that we had dependent children at the time and the policy offered security, via the life cover it offered, which would have repaid the loan. Correct me if I'm wrong, but as far as I'm aware all outstanding mortgage loans are supposed to be covered by a life insurance policy, so that the loan can be paid off in the event of death. Therefore your statement is irrelevant.
You then go on to say that you can't agree that the endowment policy option was the only option presented to us, as we would have been given three choices at the time. No where in our complaint did we say we were presented with only one option, so I'm not sure what you are trying to imply here. We might have been shown three options, but all the implications of the process indicated that not only would the endowment option be the cheapest in payment terms, but it would also be the most lucrative, as we would end up with surplus profit at the end.
Further on in your letter you point out that we both had held endowment policies before for a number of years, from which you would assume that we would utilise existing knowledge to make an informed decision. Our exiting knowledge at the time was based on policies that had performed very well and suggested that endowment policies would make profits at the end of the mortgage period. You once again make assumptions, assumptions do not establish facts. The fact is that your advisor failed to establish that we really did understand the implications that a policy could actually fail to meet the target amount. If we had at any time been informed that this could happen, we would not have considered investing in such a mortgage.
Your conclusion that the documents and illustrations provided would have explained that the maturity value was an estimate and not guaranteed and not having seen any documents or illustrations to the contrary also seems to be very much an assumption. Until I have seen the copies of the documents that you hold on my endowment file then, I have to believe that you are basing your findings on what you believe might have happened rather than what did actually happen.
As you are aware, this process started on 27th November 2005, I therefore look forward to your response, to the points I have raised in this letter, in the very near future. Once again; Time Is Of The Essence regarding this matter.
Yours sincerely,
The term "Time Is Of The Essence" is a legal term that signals that the requirement for urgency in dealing with the matter. If the urgency is not shown or the deadline is missed then a court of law will take dim view in any future proceedings. My arguments against the Building Societies reply were based on their over use of the word 'Assumed', plus one or two references to 'belief'. Nothing in their document indicated that they had anything proving what they were trying to tell me.
The deadline I had given them came and went and they had not replied. I decided to give them another 7 days to see if anything came through, big companies tend to be slow in processing complaints.
Just over two weeks after the letter leter was sent we received a reply; it admitted that there may have other options for repaying our mortgage that would have suited us better. They had handed the complaint to the compensation calculations department and they would be in touch within 21 days. They also included a leaflet from the FSA detailing how the compensation payments are calculated. A remarkable turnaround.
So we are now waiting to see how much compensation we are entitled to. As an aside the building society admitted they couldn't provide copies of what was on the endowment file as that was held by the insurance company.
The morale of my story is: if you think you were mis-sold then go for it, it's not hard and, if they refuse you the first time don't just take it. It's probably a fob-off to see if you will go away. I don't know if we will get much compensation, it will be interesting to see how much we will get, but the fact that we won without trying too hard feels like a major achievement at the moment.
1. They claimed we would have been shown an illustration for the policy which told us about premiums and growth rates, using rates recommitted by LAUTRO. They claimed that it was clear from the illustration that their could be no guarantee regarding maturity values. The rates reflected market rates at the time and the drop in those rates to today's values could not have been foreseen at that time.
2. We had dependent children and the mortgage was suitable as the policies would have paid off the mortgage and given the children security if we had died.
3. They gave/showed us other options and the choice was down to us.
4. Fees payable were not discussed but this was not a requirement until 1995, (I'll give way to them on that one)
5. We had both held endowment policies before and therefore could have utilised our existing knowledge to realise that there were no guarantees regarding performance.
6. Holding endowment policies before would have swayed our decision to choose another endowment policy and enabled us to make an informed decision.
In conclusion the investigator couldn't agree that we didn't have all the facts to hand, nor were we not aware of the risks involved with the policy. They also added that the illustrations and documents provided would have shown that the figures were only estimates and not guaranteed, nor had they seen anything in the information they had to the contrary.
They then went on to explain how to take any further complaint to the Financial ombudsman and included the appropriate leaflets, and ended by say that they realised we would be disappointed with the outcome, but that they had concluded a full and fair investigation into the matter.
As I said above the outcome didn't surprise me, they weren't going to give in without a fight. What did surprise me though was the wording used in a number of paragraphs in their reply. I initially thought that they may have given me some ammunition to use against them if I wanted to take it further, so I left it for a week or so, whilst I thought about their points. I then asked someone at work to read the two letters, mine and theirs, to see if he thought the same way as I did. It turned out that he did and he picked up on a couple of point that I had missed, so with this in mind I composed a reply to the Building Society, giving them a chance to resolve the issue before I went to the Ombudsman.
That reply letter went out via recorded delivery on the 1st February and follows here:
Reply To Refusal To Uphold My Complaint:
RE: Complaint concerning advice received on endowment mortgage
Endowment policy number: ..........
Mortgage reference number: .......... (Redeemed 1999)
.......... (Current)
In response to your letter dated 17th January 2006, your reference ...........:
I will iterate the first paragraph of my letter of complaint dated 27th November 2005:
I am writing to you to make a complaint about the way I was sold my mortgage endowment policy. I believe, for the reasons set out below, that I was mis-sold this policy and am requesting you to investigate the sale. I am also requesting that you send me a copy of my endowment file so that I can see all the documentation you have relating to my case.
You have yet to send me the requested copy of my endowment file, which as you know I am entitled to see. I will therefore make the request again: Please send me a copy of my endowment file so that I can see all the documentation you have relating to my case. I will give you until 9th February to comply with this request; otherwise it must be assumed that you do not hold any documentation on which to base any of your decisions in refusing to uphold our complaints. TIME IS OF THE ESSENCE.
In addition to this I must point out that you have made a number of assumptions in your letter that are not relevant to the facts:
You say that a number of illustrations were given to us regarding the potential growth rates for our policy and these would have made it clear that no guarantee could be made on the actual maturity value as it depended on the return actually achieved. The fact is that the illustrations were over inflated to illustrate the policy maturing with profits; there was no mention or no sign of any illustration showing a shortfall. You cannot just assume that a potential client understands the implications of over inflated rates. In order to ensure understanding it must be clearly explained that there is a potential that a policy may not meet the target amount. This did not happen at any point during any interview that we had with your advisor. Making assumptions about understanding is not establishing the facts about what is actually understood.
You say in your letter that the downturn in the economy and reduction in rates could not have been foreseen at the time the policy was sold. If your building society, who we would assume were experts in finance, could not see such a downturn in the economy and, in turn, indicate to us the danger of a shortfall, then how could we understand the implications that a policy would not meet the projected target amount? This would indicate that we were not given the full facts during the selling process; again this to me indicates mis-selling took place.
Another point that you indicate is that we had dependent children at the time and the policy offered security, via the life cover it offered, which would have repaid the loan. Correct me if I'm wrong, but as far as I'm aware all outstanding mortgage loans are supposed to be covered by a life insurance policy, so that the loan can be paid off in the event of death. Therefore your statement is irrelevant.
You then go on to say that you can't agree that the endowment policy option was the only option presented to us, as we would have been given three choices at the time. No where in our complaint did we say we were presented with only one option, so I'm not sure what you are trying to imply here. We might have been shown three options, but all the implications of the process indicated that not only would the endowment option be the cheapest in payment terms, but it would also be the most lucrative, as we would end up with surplus profit at the end.
Further on in your letter you point out that we both had held endowment policies before for a number of years, from which you would assume that we would utilise existing knowledge to make an informed decision. Our exiting knowledge at the time was based on policies that had performed very well and suggested that endowment policies would make profits at the end of the mortgage period. You once again make assumptions, assumptions do not establish facts. The fact is that your advisor failed to establish that we really did understand the implications that a policy could actually fail to meet the target amount. If we had at any time been informed that this could happen, we would not have considered investing in such a mortgage.
Your conclusion that the documents and illustrations provided would have explained that the maturity value was an estimate and not guaranteed and not having seen any documents or illustrations to the contrary also seems to be very much an assumption. Until I have seen the copies of the documents that you hold on my endowment file then, I have to believe that you are basing your findings on what you believe might have happened rather than what did actually happen.
As you are aware, this process started on 27th November 2005, I therefore look forward to your response, to the points I have raised in this letter, in the very near future. Once again; Time Is Of The Essence regarding this matter.
Yours sincerely,
The term "Time Is Of The Essence" is a legal term that signals that the requirement for urgency in dealing with the matter. If the urgency is not shown or the deadline is missed then a court of law will take dim view in any future proceedings. My arguments against the Building Societies reply were based on their over use of the word 'Assumed', plus one or two references to 'belief'. Nothing in their document indicated that they had anything proving what they were trying to tell me.
The deadline I had given them came and went and they had not replied. I decided to give them another 7 days to see if anything came through, big companies tend to be slow in processing complaints.
Just over two weeks after the letter leter was sent we received a reply; it admitted that there may have other options for repaying our mortgage that would have suited us better. They had handed the complaint to the compensation calculations department and they would be in touch within 21 days. They also included a leaflet from the FSA detailing how the compensation payments are calculated. A remarkable turnaround.
So we are now waiting to see how much compensation we are entitled to. As an aside the building society admitted they couldn't provide copies of what was on the endowment file as that was held by the insurance company.
The morale of my story is: if you think you were mis-sold then go for it, it's not hard and, if they refuse you the first time don't just take it. It's probably a fob-off to see if you will go away. I don't know if we will get much compensation, it will be interesting to see how much we will get, but the fact that we won without trying too hard feels like a major achievement at the moment.
Endowment Mortgage Mis-Selling Part 1.
You are all no doubt well aware of pitfalls of Endowment Mortgages and the promises made by the organisations selling them way back in the 1980's and early 1990's. Well like many people we have an endowment mortgage which was opened back in 1989. In truth the mortgage is now part repayment, part endowment and has been since 1999 when we moved into our current property, but the endowment part has been effectively unchanged since it was taken out. It is backed by 2 endowment policies, one from a previous endowment mortgage and a top up one which was started when the new mortgage was started.
Back in November last year we received the dreaded Red Letter from the company who ran the endowment policy. Going by today's interest rates it looks as if the policy would be £10,000 down on the target figure, that is nearly two fifths of the target amount, which to me is a pretty significant sum. So at that point we resolved to do something about it.
I looked around at the ambulance chaser adverts and, after checking one or to claims companies out, decided that their rates for winning a case were plainly outrageous, they would take around 30% of anything we recovered. I knew Blue Witch had made and won a claim in the past under her own steam, so decided that there was nothing to be lost pursuing a claim by our own methods. I searched the net and found some great advice on the Which? website. The even have a Complaint Letter generator which I used to generate our initial template letter to the Building Society that sold us the mortgage.
Even after reading the articles on the Which website we were a bit unsure as to whether were really mis-sold the mortgage, but nothing ventured nothing gained, I ran the complaint letter generator and ticked boxes all over the place, ran the generator and then added a little bit of detail of my own. We checked over the letter (a copy of which appears below, with certain bits changed to hide names and policy details etc.) and sent it off on 27th November 2005. We then sat back to await the response.
Our Initial Complaint Letter:
RE: Complaint concerning advice received on endowment mortgage
Endowment policy number: nnnnnnnnnn
Mortgage reference number: nnnnnnnnnn
I am writing to you to make a complaint about the way I was sold my mortgage endowment policy. I believe, for the reasons set out below, that I was mis-sold this policy and am requesting you to investigate the sale. I am also requesting that you send me a copy of my endowment file so that I can see all the documentation you have relating to my case.
An adviser in your company sold me a (Insurance Company Name) endowment policy in April/May 1989. The target amount was £nn,nnn.
The reasons I am complaining are as follows:
We have recently received a letter from (Insurance Company Name) informing us that there is a high risk of a shortfall on the policy. At the time we took out the original mortgage for £nn,nnn, we transferred another policy from a previous mortgage, to cover the rest of the new mortgage.
I would like to emphasise that the main reason we took out the policy, at the time, was that we were told the policy would pay off the mortgage at the end of the term and, that there would be, an additional sum at the end of the term. We were also informed that; (Insurance Company Name) were a very good company, with a proven track record, in the endowment policy business, this was another factor that swayed us into buying the policy.
I would be grateful if you could reply to this letter within 14 days and handle this complaint according to your usual complaint procedures.
Yours sincerely........
The Buiding Society responded within the two weeks and sent us some forms to fill in relating to mortgages and policies that we had previously held, they also got in contact with the Endowment Policy company to get more details from them. It took us a while to get complete the forms as we had to get together a fair few details regarding old mortgages etc. from boxes in the loft, some of which we no longer had, so I just stuck that down on the form. In the end the details needed were only those relating to mortgages the policy had been linked to, and as they had always been with the same building society, they could find those details form their own records. The completed forms were sent off in early January, the building society at that point were still waiting for details from the policy Insurance company.
Continued in Next Post...............
Back in November last year we received the dreaded Red Letter from the company who ran the endowment policy. Going by today's interest rates it looks as if the policy would be £10,000 down on the target figure, that is nearly two fifths of the target amount, which to me is a pretty significant sum. So at that point we resolved to do something about it.
I looked around at the ambulance chaser adverts and, after checking one or to claims companies out, decided that their rates for winning a case were plainly outrageous, they would take around 30% of anything we recovered. I knew Blue Witch had made and won a claim in the past under her own steam, so decided that there was nothing to be lost pursuing a claim by our own methods. I searched the net and found some great advice on the Which? website. The even have a Complaint Letter generator which I used to generate our initial template letter to the Building Society that sold us the mortgage.
Even after reading the articles on the Which website we were a bit unsure as to whether were really mis-sold the mortgage, but nothing ventured nothing gained, I ran the complaint letter generator and ticked boxes all over the place, ran the generator and then added a little bit of detail of my own. We checked over the letter (a copy of which appears below, with certain bits changed to hide names and policy details etc.) and sent it off on 27th November 2005. We then sat back to await the response.
Our Initial Complaint Letter:
RE: Complaint concerning advice received on endowment mortgage
Endowment policy number: nnnnnnnnnn
Mortgage reference number: nnnnnnnnnn
I am writing to you to make a complaint about the way I was sold my mortgage endowment policy. I believe, for the reasons set out below, that I was mis-sold this policy and am requesting you to investigate the sale. I am also requesting that you send me a copy of my endowment file so that I can see all the documentation you have relating to my case.
An adviser in your company sold me a (Insurance Company Name) endowment policy in April/May 1989. The target amount was £nn,nnn.
The reasons I am complaining are as follows:
- The endowment was not suitable for me
- The adviser did not explain there was a risk the endowment would not meet the target amount
- The adviser did not discuss in full the funds my endowment was to be invested in
- The adviser did not properly establish my attitude to risk
- The sale didn't follow the rules
- The adviser didn't fully explain the fees and charges on the policy
- No fact find was completed during the sales process and therefore the adviser did not have full knowledge of my/our financial situation
- The adviser said the policy would definitely pay off the mortgage
- And the adviser said there would be a lump sum in addition at the end of the term
We have recently received a letter from (Insurance Company Name) informing us that there is a high risk of a shortfall on the policy. At the time we took out the original mortgage for £nn,nnn, we transferred another policy from a previous mortgage, to cover the rest of the new mortgage.
I would like to emphasise that the main reason we took out the policy, at the time, was that we were told the policy would pay off the mortgage at the end of the term and, that there would be, an additional sum at the end of the term. We were also informed that; (Insurance Company Name) were a very good company, with a proven track record, in the endowment policy business, this was another factor that swayed us into buying the policy.
I would be grateful if you could reply to this letter within 14 days and handle this complaint according to your usual complaint procedures.
Yours sincerely........
The Buiding Society responded within the two weeks and sent us some forms to fill in relating to mortgages and policies that we had previously held, they also got in contact with the Endowment Policy company to get more details from them. It took us a while to get complete the forms as we had to get together a fair few details regarding old mortgages etc. from boxes in the loft, some of which we no longer had, so I just stuck that down on the form. In the end the details needed were only those relating to mortgages the policy had been linked to, and as they had always been with the same building society, they could find those details form their own records. The completed forms were sent off in early January, the building society at that point were still waiting for details from the policy Insurance company.
Continued in Next Post...............
