The couple from Wickhamford in Worcestershire, used their own savings to help top-up a policy that was going to fall short, but were told by the lender, Lloyds TSB, and later the Financial Ombudsman Service (FOS), that these payments would effect the calculation of compensation, meaning they would receive nothing.
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However, upon taking the case to Cheltenham County Court, the judge found in the couple’s favour and awarded them £5,000 plus costs.
Rob Gill, principal at Clement Rabjohns, who acted on behalf of the couple, commented: “In 2005 the endowment policy was heading for a shortfall of between £14,000-£18,000 at maturity so the couple decided to put their own money in. They were told no financial compensation would be paid to them, simply because they had made lump sum overpayments to reduce the capital debt and the standard calculation took these payments into account. The ruling drives a coach and horses through the way compensation is calculated if borrowers have made overpayments to their mortgage.”
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However, Emma Parker, press officer at the FOS, said:
“It is all about putting the consumer back into a position they would have been in if they hadn’t been advised to take an endowment policy.
Judges are all different and there are a lot of inconsistencies in the courts right now. However, as this was a County Court, and not the High Court, it won’t set precedent.”
