On reflection

On reflection

It's all the fault of Sir Howard Davies. He was the boss of the City regulator when the endowments mis-selling scandal first began to unfold. His crime? He rejected demands for a review along the lines of the probe into pensions mis-selling.

Despite early signs that many endowments would fail to pay off millions of mortgages, he said the burden should be on individuals to complain. The finance industry could wait passively while those of us who kept records amassed the information we needed to mount appeals.

The pensions mis-selling review was different. It forced financial advisers who sold personal pensions (when a company pension would have been a better bet) to carry out the review for the customer. Everyone who was sold a personal pension was told their case would be reviewed for them. Then they were told if the verdict was in their favour.

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The sale of endowments, said Sir Howard, was more complicated than personal pensions mis-selling. What he meant was the industry couldn't afford another pensions mis-selling style review because most people had been mis-sold and the bill cost the industry £11.5bn plus £2bn costs.

Consumer groups argue most endowments were missold. Few people knew the risks or understood the consequences. Looking at projections that say 80% are off target, it is hard to argue mis-selling was not widespread.

But another consequence of the Davies doctrine is that finance companies can wrig gle out of many compensation claims.

First, there is the rule preventing customers from appealing to the ombudsman who bought before April 1988. Then there is the rule preventing customers from appealing if they wait more than three years after the first warning letter.

Even when compensation claims are successful, there are moves to limit compensation payouts (despite the regulator saying otherwise) and throwing all kinds of legal barriers in the way to making any kind of payout at all. Worst of all are the financial advisers who write threatening letters to their customers claiming that an appeal to the ombudsman, should it be unsuccessful, will be followed by a "case fee" and a bill for costs.

This blatant attempt to scare off customers who think of complaining should be investigated by the FSA. It is intimidation and should be unlawful. It didn't happen during the pension misselling review, but does now. Cheers, Sir Howard.

Guardian Unlimited © Guardian Newspapers Limited 2003