As we have already noted, mortgage endowments currently account for approximately 50% of all new complaints reaching the investment division of the Financial Ombudsman Service. The number has risen sharply, from 3,133 new cases in the period 1 April to 30 September 2000, to 5,110 in the last five months. These cases vary considerably in detail. However, in a very large number of the complaints we upheld, the endowment was an inappropriate product, bearing in mind the customer’s attitude to risk.

In October 2000 we issued a briefing note for firms. This outlined how we had been dealing with mortgage endowment complaints to date and explained our approach. Our aim was to enable firms to handle these complaints with greater confidence and consistency. We stressed that compensation is likely to be due only where the endowment policy was wrongly sold at the time and there has been a loss as a result.

Our note was followed in November 2000 by the Financial Services Authority’s Consultation Paper on endowment mortgage complaints, CP75. This set out the guidance the Financial Services Authority (FSA) proposes to issue, helping firms to determine whether customers suffered financial loss and to quantify the loss, where there was one.

Firms will be reviewing their procedures in the light of this consultation paper, and we are developing our working methods, in the the light of the anticipated regulatory guidance, to deal with the large number of complaints we have received.

We are keen to give firms whatever assistance we can. We plan to publish the identification of common issues, decision trees and the guidance on appropriate redress that we will be using. We also plan to provide training based on this information. More details will be available on our website after the FSA has issued its regulatory guidance.