Around 1990 we took out an endowment mortgage, the endowment element being provided at the time by Norwich Union, now Aviva.
As it is approaching maturity Aviva wrote to us, but the figures don’t make sense. The situation seems to be that for nine years, for some reason we can’t explain, we stopped paying the premiums of £54.35 per month. Aviva did not draw our attention to the missed payments. Instead, it paid the premiums out of what would have been the amount payable on maturation of the policy.
Then it created a loan, with whopping interest, to pay the missing premiums. It did not inform us what it was doing, let alone ask if this is what we wanted.
Having to find the extra £6,000 for the missed premiums is difficult enough, although we accept that we owe the money, but an extra £7,000 interest for a loan we never asked for seems to me entirely unreasonable and, given we have signed nothing to authorise this, probably illegal. GR, Northumberland
The Financial Ombudsman Service tells me that it receives a steady trickle of complaints about missed policy payments and covering loans that have not been flagged up. It says that, when it investigates such cases, it expects to see evidence that the finance company informed the policyholder about the loan and its terms plus a detailed breakdown of how the interest was calculated.
The question has to be asked: how come you didn’t notice that the payments had stopped leaving your account each month for nine years?
Aviva says it wrote to you twice about the missed premiums which actually stopped in 2003 and spoke twice to your wife on the phone and it has provided you with copies of the letters and call records.
However, after I asked it to investigate your case it finds that a non-forfeiture clause in the policy allows it to continue for 12 months if a customer missed payments, with an 8.5% interest rate applied to the missing payments. Under the terms and conditions it should never have been allowed to continue for more than the 12 months, as the 8.5% loan was never intended as a long-term facility.
Instead, with no more payments forthcoming from you, the policy should have been paid up in 2004 and you would have received £10,788.54. Aviva has retrospectively adjusted the interest rates on those loaned premiums using a method approved by the Financial Reporting Council in relation to non-forfeiture clauses.
It is also honouring an endowment “promise” of £7,200, which would not have been payable had the policy been made paid up in 2004. This means that you will receive £16,262, a deal you have accepted.
The really worrying aspect is that this error only came to light when we asked questions.
If you need help email Anna Tims at your.problems@observer.co.uk or write to Your Problems, The Observer, Kings Place, 90 York Way, London N1 9GU. Include an address and phone number.
