FSA to relax time bars for mortgage endowment complaints

The Financial Services Authority Board has approved proposals that will significantly reduce the risk that some endowment policyholders who were mis-sold policies might have missed the opportunity to complain because they did not realise they had a claim and failed to act in time.

The Financial Ombudsman Service is not normally able to consider complaints that are referred to it more than three years after a complainant who was mis-sold first became aware that they had suffered a loss (the so-called “time bar” rule). For endowments, this could be considered to be the date on which the policyholder had received his or her first reprojection letter from the policy provider. Some policyholders had received their first letters in early 2000, meaning that the time bar could take effect for them early next year.

The FSA has been in discussions with insurers during the year and has proposed rule changes to clarify the position for consumers. The changes mean that a red (and not an amber or green) reprojection letter is to be regarded as notice of the potential for loss needed for time to start running; and customers will not be held “out of time” until six months after a second red letter is sent, if this gives the consumer more than three years after the first, to avoid the risk that a single red letter could cause someone to be held out of time.

John Tiner, FSA managing director, says: “We have acted here on behalf of policyholders, without causing unjustified alarm or panicking consumers. These proposals will clarify the position for those that might have been affected and ensure that policyholders with complaints have enough time to pursue them.”

At this stage, the FSA sees no need to make other changes, e.g. to extend the three-year period, but will keep this under review.