Ombudsman comments on Endowment Mortgages

Brendan Burgess

From page 22 his biannual review covering the first 6 months of 2010

Limitation to Jurisdiction – Section 57BX of the Central Bank and Financial Service Authority Act 2004 – “6 Year Rule” ‐ Endowment Policies

The jurisdiction of the Financial Services Ombudsman is limited to the investigation of complaints against Financial Services Providers, where the conduct complained of occurred not more than 6 years before the complaint was made. Accordingly, any complaint which the Complainants may have in respect of the sale of this type of policy to them falls outside of the scope of investigation due to section 57BX(3) of the Central Bank Act 1942 (as amended by the Central Bank and Financial Services Authority of Ireland Act 2004).

There is no provision in the Act for the period of six years to be measured by reference to the discoverability of the complaint.

Section 57BX limits our jurisdiction in a number of complaints submitted to this office. The main type of complaints it impacts on are complaints concerning Endowment policies, policy reviews and mis‐selling cases in general.

In relation to Endowment policies of the Findings issued 85% of Complaints were not upheld.

Complaints sent to this office regarding Endowment policies usually entail two parts, one in relation to the manner in which the policy was sold and the second part in relation to the performance of the policy and the projected or realised shortfall on maturity of the policy.

Many endowment policies were sold in the late eighties and early to mid nineties and are currently reaching maturity after a fixed term.

The Bureau’s investigation of Endowment Complaints is therefore limited to whether the Provider administrated its policy in accordance with its terms and conditions. On investigation of these complaints the Bureau would request the policy documentation and brochure issued to the Complainant at the inception of the policy. In general Endowment policy documentation includes the warning that the maturity value figures are illustrative only and the value of the policy can rise as well as fall.