Abbey fined £800,000 for mishandling complaints

Abbey received a £800,000 fine from the Financial Services Authority yesterday for mishandling mortgage endowment complaints, its third fine from the City watchdog.

Abbey received a £800,000 fine from the Financial Services Authority yesterday for mishandling mortgage endowment complaints, its third fine from the City watchdog.

Abbey, which was taken over by Spain's Banco Santander Central Hispano last year, will now review 50,000 claims for compensation going back to January 2000. The UK bank mishandled 5,000 complaints between October 2001 and September 2003, including 3,500 that were rejected when they should have been upheld, the FSA found. The City watchdog said losses of up to £19m could have been incurred by those 3,500 customers.

In a damning verdict, Clive Briault, the FSA's director of retail markets, said: "By putting its own interests ahead of those of its customers with a mortgage endowment complaint, Abbey has singularly failed to treat its customers fairly. Its failings were made more serious as they occurred at a time when there was a high level of awareness within the industry about mortgage endowments and concerns regarding the fair handling of complaints."

The fine is the largest the FSA has handed out to companies mishandling mortgage endowment complaints. It fined Friends Provident £675,000 in 2003 and Allied Dunbar Assurance £725,000 last year. The FSA said the fine imposed on Abbey would have been far higher had its new owner Santander not acted immediately to address the poor handling of complaints. Abbey has been fined by the FSA twice before, a combined £2.3m in December 2003 for failures in its anti-money-laundering arrangements.

The watchdog also rebuked Abbey for providing it with "inaccurate and potentially misleading information". The bank wrote to the FSA in the spring of 2002 stating it was applying guidelines set out in a letter to bank chief executives by the FSA's chief executive John Tiner. But it was found that Abbey had failed to comply with three of the nine principles laid down by Mr Tiner.

Consumer organisations welcomed the fine. Tim Moore, the co-founder of Endowmentclaims.com, said: "We hope that FSA fines will shame insurers, like Abbey, into dealing more reasonably with endowment mis-selling claims."

The FSA hinted other companies might be in line for a fine.

Abbey made a £154m provision for compensation claims in February, including for mis-selling mortgage endowments. A spokesman said it might make further provisions. The bank has introduced new procedures and set up a single complaints handling system.