Your Industry  

Your liability for mortgage endowment mis-selling

This article is part of
Guide to Mortgage Endowments and Interest-Only

There is a time limit for borrowers who want to make a complaint about their mortgage endowment and it is running out.

The Money Advice Service states your clients may feel they were mis-sold an endowment mortgage if it was not suitable for their needs and circumstances. However, the service states your clients can only complain if the advice they received was incorrect or misleading.

Your clients don’t have grounds for complaint simply because the endowment has not performed as well as they would have hoped.

Article continues after advert

The Money Advice Service states your clients do have grounds for complaint if:

1) It wasn’t fully explained to your client that there could be a shortfall at the end of their mortgage term.

2) Your client was told the endowment would definitely pay off the mortgage.

3) The fees and charges were not explained.

4) You did not complete an assessment of your client’s financial circumstances and attitude to risk.

5) Your client’s endowment policy and mortgage was set up to run into your retirement and you did not ensure your client would have the income to continue to make payments.

6) You recommended that your client cash in an existing endowment and then sold them another.

The Money Advice Service states complaints can be rejected if:

1) Your client received a letter warning of a high risk of a shortfall; then received a subsequent letter giving at least six months’ notice of a ‘final date’ by which they had to complain; and

2) that ‘final date’ is at least three years after the date your client received the first letter (and at least six years since they bought the policy).

However the Money Advice Service warns your clients can still complain to the Financial Ombudsman Service after the ‘final date’ even if you rejected the original complaint as “being out of time”, if:

1) There are exceptional circumstances.

2) The time bar was wrongly applied.

3) The time bar was unfair.

It says this complaint to Fos should be done within six months of your firm sending the client a ‘final response’ letter.

If the adviser or company that sold the endowment no longer exists then consumers can also contact the Financial Services Compensation Scheme, which may be able to pay compensation if the firm that sold the endowment has ceased trading.

If the Ombudsman decides in the policyholder’s favour it may rule that compensation must be paid. This will not necessarily cover any mortgage shortfall the policyholder has.

It is merely meant to return the policyholder to the position they would have been in if they had received proper advice.