Special time limits apply for complaints about mortgage endowment policies. The rules have changed over time, so the time limits that apply will depend on when your customer received a warning letter.
Most mortgage endowment complaints we receive are now affected by the current time limit rules which have been in place since 1 June 2004. Under these rules:
- the time limit starts to run when the customer receives a ‘high risk’ warning letter
- ends three years from this date – as long as the customer has been given a final date to complain by, and has been notified of this at least six months before the time limit expires
If a customer got a high risk warning letter
Businesses send out a high risk warning letter, also known as a ‘red’ letter, to their customers. This tells them there’s a high risk the policy will pay out less than expected when it matures. These letters must also show a calculation of what the expected amounts are, illustrating a shortfall against the target amount at all growth rates used.
Customers have three years to complain to us from the date of receiving this letter, providing a final date warning letter is also sent.
As a business, you must write to the customer to confirm this final date, at least six months before it’s due. If you don’t, the three-year time limit isn’t valid and the customer may have even longer to complain.
If a policy has matured or the customer has surrendered the policy after receiving a high risk warning letter
The three-year time limit and rules requiring you to tell the customer about the final date for complaining still apply.
Businesses sometimes say that they shouldn’t have to tell customers about the final date if they no longer have the policy. Read about a past case where an ombudsman considered this, but didn’t agree with the business.
If the customer surrendered the policy, or it matured, and they didn’t receive a high risk warning letter before this
The special mortgage endowment three-year time limit doesn’t apply. Whether or not the complaint is out of time, depends instead on the general time limit rules.
If a customer received a high risk warning letter before 31 May 2001
The current rules may apply to these complaints, but in some cases we may need to consider the Financial Services Authority's (FSA) old time limit rules.
What doesn’t count as a high risk warning letter
Customers may receive other letters from companies but these don’t necessarily count as high risk warning letters.
If a customer receives one of these, the three-year time limit won’t usually apply:
- amber letters – these warn of a significant risk of shortfall but show a projected surplus at the highest assumed rate of growth
- letters containing mixed messages – for example, where there’s a high risk warning of a shortfall but the projections show an expected surplus
In these cases, we’ll apply the general time limits to see if the complaint is late.
When the time limits don’t apply
In some cases, a customer might have found out they had a reason to complain before they received a high risk warning letter. For example, if their policy matured with a shortfall before they got the letter, they would usually have enough information to know they have cause for complaint. In this case, we might accept that the three-year time limit started earlier.
However, if you think different times limits should apply, you’d normally need to convince us that the customer:
- knew, or ought to have known there was cause for complaint at an earlier stage
- had a similar level of knowledge as they would have had if they’d received a high risk warning letter
We sometimes receive complaints from customers after the three-year time limit is up. However, we can only investigate these if the business agrees.
We’ve seen cases where a business has calculated the final date incorrectly – giving a date from when the high risk warning letter was sent, rather than when the customer received it. In these cases, we look at the individual circumstances of the complaint and how this mistake affected the customer, to decide whether it can be looked at out of time. Read a past case where our ombudsman considered this, but decided the complaint was still out of time.
We can consider complaints made out of time if there were exceptional circumstances. For example, if the customer was incapacitated. In these cases, we’ll carefully look at the customer’s reasons and individual details of their complaint.
Complaints under older versions of the rules
In some cases, we have to consider the case under the older rules.
The 1 February 2003 FSA rules allow customers to complain from the longer of either:
- three years from when they knew, or ought reasonably to have known, they had reason to complain
- six months from the date they received a second high risk warning letter (or other reminder of the need for them to act)
But these special rules don’t apply if:
- we decide that the general time limits should apply for that particular complaint
- you can show that the three-year period allowed by the general time limit rule had started to run before the customer received a ‘high risk’ warning letter
Customer complains after time limit ran out
John was advised to take out a mortgage endowment policy in 1990.
He received a high risk warning letter in August 2000 and then another one in March 2003. He should reasonably have known he had reason to complain on 3 August 2000 when he received the first high risk warning letter. At that point, he had until 3 August 2003 to complain.
He received a second high risk warning letter in March 2003. So he had until September 2003 to complain under the special mortgage endowment rules.
When he did finally complain in February 2018, we couldn’t consider his complaint. Time ran out for his complaint in September 2003.
New rules were introduced on 1 June 2004 but they didn’t apply to John, even though he complained after the new rules were introduced as his time to complain had already expired.