According to the Mail on Sunday, UK financial services watchdog the FSA is set to order Abbey [ABBE.L] to reopen thousands of complaint cases on the mis-selling of endowment mortgages in the next few weeks. The move, if it becomes concrete, is expected to cost Abbey, one of the major providers of endowment mortgages, huge amounts of money.
It is not known how many compensation claims Abbey has rejected to date but according to the report, the number could reach up to 30,000 if it is in line with other major endowment sellers' rate of rejections. Abbey has been under the FSA's investigation since last November for its clumsy handling of consumer complaints.
While the FSA itself is refusing to comment on this report specifically, it has acknowledged that forcing Abbey to re-examine the rejected cases is a sanction that it could impose. In many respects, the impact of such a penalty could prove far more damaging to the bank than a simple cash fine - the Abbey image would be publicly tarnished by direct association to one of the most serious UK consumer finance scandals of recent times.
Such an outcome would constitute a major headache for Abbey's new owner, the Spanish group Banco Santander. It is fighting to turn around Abbey's performance after the bank posted heavy losses in recent years, though Abbey's pre-tax profit in 2004 suggested that its strategy may well be working. Yet the nascent turnaround has come at a price - Banco Santander has axed 4,000 jobs since buying Abbey last year.
If the Mail's reports prove correct, there will be more bad press on the way. But bosses at the bank have no option but to face the wrath of the regulator by accepting its punishment and ensuring it is visibly seen to be complying with any recommendations the FSA may make regarding its treatment of complaints.
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