The Treasury Select Committee write:

It may well be that many policyholders do know of the complaints process but have opted not to act because “something might turn up”.

What policyholders might well not realise is that there are time limits on making a valid complaint. If the policyholder ultimately has to appeal to the Financial Ombudsman Service, complaints will only be considered if made within three years of receiving the first red letter warning of a likely shortfall or six months of receiving a second red letter.

While the latest FSA leaflet “Your endowment mortgage—have you acted yet?” does mention that a time limit for complaints exists, it is not explained in detail and Mr Harvey of Aviva told us that this will not be sent out until its phase three mailing, planned for July 2004. This could well be too late for anyone who received a red letter in the first wave of mailings in 2000 and 2001.

Mr Tiner of the FSA told us that information on the time limits is currently “not set out in the red letter, it is set out in the document that people can request as a consequence of the red letter that deals with ‘How do you make a complaint?’”

The issue of time limits is likely to become increasingly pressing given that the first wave of projection letters went out in 2000, although Mr Prosser of Legal & General assured the Committee “We would not be looking to timeliness as a reason for not dealing with a complaint.”

The Committee welcomes Legal & General’s statement that it would not use time limits to rule out complaints, but across the industry urgent action is required to ensure that substantial numbers of policyholders do not lose their rights to compensation. It would be unfair to apply time limit rules which early mailings made little or no mention of.

These rules, which have still not been spelt out explicitly to most policyholders, should be reviewed and the time limits extended.

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This recommendation will doubtless be highly unpopular in the financial services industry. We think it is important, and a matter of natural justice, as many of those affected will not have understood the position they are in.

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