Out of Time for claim in Endownment

kitkat33_2

Hi there my parents bought their house 10 years ago and used an endowment mortgage to do so then 5 years ago they discovered the shortfall they have since paid off their mortgage. i understand from reading about this it has to be 6 years from date mortgage taken out or 3 years since cashing it in. Are there any loopholes to get round this?

EdInvestor

The time bar is three years after they learnt there was a "high risk" of a shortfall -a "red letter". This is not the same as a letter that says there was a possibility of a shortfall.

kitkat33_2

sorry for being dumb but i don't know what you mean?

EdInvestor

When you say they "discovered the shortfall," what do you mean? How did they learn of it?

vinno65

HI kitkat33,
Edinvestor has pointed out the stupidity and unfairness of the FOS for relying on these so called red letters. If you are sent a letter by a firm saying there is a "high risk" that your endowment may have a shortfall then this starts the time bar clock ticking. Red letters usually indicated that there is a potential shortfall at all 3 investment rates set out by the FSA 4% 6% and 8%. However if you were sent an amber letter i.e. one that states there is a "significant risk" and shows a potential shortfall at only the lowest rate then this does not start the clock ticking. However as you can see from the above BOTH letters are alerting you to the fact that your endowment may not pay out what it was supposed to. Even a child could see the unfairness in this scenario. Consequently hundreds of thousands of people who had their endowments with the poorer performing companies have had their complaints time barred.
These letters do not hold up in court however. I took a firm to court who tried to have my claim thrown out on the basis of the limitations act 1980 and the initial "red letter" they sent me. It is this act that the FSA have based their time bar rules on. However it is a bit more complex than the FSA rule and the firm failed to have my claim time barred in court.
There are many factors in your parents case. From what you have said so far I would imagine that they would be time barred from taking their case to FOS firstly because I presume they recieved a red letter 5 years ago, or even if they didn't the firm would argue ( and I know of cases where they have) that you parents were aware of the risks 5 years ago as this is why they changed their mortgage to repayment, and as such would again be time barred from the FOS.
None of this would stop your parents taking the firm to court of course if they had the stomach for a fight.
I suggest you complain to the firm and see what there response is. If they refuse even to look at your complaint because it is time barred reply that you intend taking them to court so need to see if you have an actionable case. You will only find this out once they have investigated after all there may not have been a miss-sale in the first place and even if there was your parents may not have lossed out financially.
If there was a miss-sale and your parents have lossed out then they may find the FOS route blocked but they possibly could if they wished take the firm to court.Any redress figure under £5000 would go to small claims thus lowering costs if any if they were to lose.
Let us know how you get on.
regards Vinno

EdInvestor

Kitkat

Which company or IFA sold the mortgage to your parents?