Redress for mortgage endowment mis-selling must be calculated to value the policy up to the present day, says guidance from the Financial Ombudsman Service.
Latest edition of The Financial Ombudsman Service newsletter suggests some financial intermediaries are failing to correctly calculate compensation which may be owed to clients because they wrongly believe compensation is only payable up to the period consumers were informed of a problem.
Under the section entitled calculating compensation payments in complex mortgage endowment mis-selling cases the FOS says in cases where the client is found to have been mis-sold the remuneration payable must cover any financial loss up to the present date.
Guidance presented by the FOS suggests some IFA firms still believe they are only required to pay compensation for the period up until they inform clients of any potential shortfall to their policy at maturity.
The case presented reveals the firm accepted it had mis-sold the policy, however, executives believe the couple – Mr and Mrs B – had not suffered any financial loss as the company had given them sufficient time to mitigate their loss.
Even though the letter sent the couple warned of a potential shortfall, the FOS notes the letter includes details of a potential surplus if investments met the higher possible rates of return.
There was nothing in the letter to suggest action was required by the couple, immediately, says the FOS, so there are no grounds on which the company can claim the couple should have taken action sooner and mitigate losses which at that time were not apparent.
Additional guidance by the FOS states advisers must calculate each compensation payment individually – rather than lump them together – particularly in cases where the client has more than one policy, as one policy may require a much larger payment than another, as one policy reveal a financial loss.IFAonline
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