The Endowment Diary

The Endowment Diary

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The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Thursday, January 23, 2003

My new letter as promised:

"Dear Sir/Madam,

I wish to make a claim for financial redress in respect of a ***(edited out) endowment policy sold to me, in August 1987, by ***(edited out) the estate agents.

The basis of my claim is as follows:

 The Mortgage Services Partner of *** advised me that the endowment would produce a surplus in excess of the mortgage which would be tax free.

 The Partner did not explain that there was a risk.

 There was no mention of the funds that my endowment would be invested in.

 The Partner did not enquire as to my attitude to risk.

 The Partner did not discuss the fees and charges on the policy.

 There was no fact find completed during the sales process.

 Other options for paying off the mortgage were not discussed.

Please be advised that I have already written to *** along these lines. They reject the claim citing, amongst others, the fact that the Financial Services Act had not yet come into force at this stage. I reject their reasoning on a number of grounds; including, but not limited to, the following:

 Whether the FSA has jurisdiction, or not, over policies purchased before April 1988 is irrelevant. I was told that there would be a tax free surplus over and above the mortgage sum borrowed. There is now a projected shortfall, as advised by ***, of £10500 assuming a 4% growth rate.

I draw your attention to the case summarised in The Times (26 October 2002); whereby David Barker cited a 1965 Court of Appeal judgement by Lord Denning which ruled that a verbal statement which induced someone to take out a contract could be considered to be a warranty. Mr Barker was successful in obtaining compensation from the Halifax for the shortfall in his policy.

 The fact that the Financial Services Act came into force eight months after **** sold me the endowment does not alter the key question as to whether best practice, from both an ethical and industry-wide perspective, was followed when the policy was sold.

 A well regulated ethical company would have been aware of the forthcoming legislation, and would have ensured best practice procedures were in place prior to its implementation; to ensure that the key issues raised by the legislation were addressed.

 As to whether the under-performance of the endowment policy could have been foreseen, or not, is irrelevant. The issue is whether the policy was mis-sold, or not, it is my contention that it was mis-sold.

 I believe that the Sale of Goods act also applies, namely that the policy was sold as a “product” that would cover my mortgage debt, not as an investment. This “product” has been shown to be not “fit for purpose”; and as such the shortfall should be compensated by the agent (****) or the product “manufacturer” ****.

I completed the Financial Ombudsman Endowment Mortgage Questionnaire, which I despatched in November. They have advised me that I should raise this matter with the product provider; ie yourselves. To this end please be advised that I have enclosed the following:

 The Endowment Questionnaire.

 My letter to **** raising the complaint (dated 11 October 2002).

 **** acknowledgement of receipt (dated 21 October 2002).

 The rejection from **** Compliance and Quality Control Director (dated 28 October 2002).

 My response to their rejection (dated 4 November 2002).

 ***** acknowledgement of this (dated 7 November 2002).

Please feel free to contact me if you require further information.

Please be advised that since September I have maintained a public diary of my efforts to obtain redress, on my website http://www.kenfrost.com. Additionally, I have copied this letter to The Times.

Thank you in advance for your time and assistance in this matter.

Yours faithfully,


K. Frost"

Isn't this fun!

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