Time-bars set for legal challenge

THE legality of time-bars on mortgage endowment complaints is set to be challenged as the door closes on hundreds of thousands of mis-selling victims.

A group of mortgage endowment complaint firms are in talks about mounting a joint legal challenge against time-bars, which have prevented nearly a million people facing endowment shortfalls from seeking compensation.

The challenge is expected to centre on how time-bar letters were served to customers, which is regulated by Financial Services Authority under the Financial Services and Markets Act.

The FSMA states that warning notices can be 'deemed to be served', which means the recipient doesn't have to physically accept the letter for it to be served.

However, the firm does have to be able to prove how the letter was addressed, stamped and posted. Marianne Fitzjohn, managing director of the company behind the challenge, Endowment Justice, said a number of providers are unable to do this.

The company is currently challenging the validity of time-bar letters with the FSA, but if it is unsuccessful it is looking to launch a test-case before the end of the year. The challenge will not apply to people that received warning letters but choose not to act on them.

She said: 'We have spent a long time looking into the legality of this and we think there is a loophole here. We have already written to a number of endowment providers and have had one firm holding up their hands saying, 'yes, we can't prove it, we will re-look at the complaint'.'

Fitzjohn claims the delivery of reprojection letters was in most cases outsourced by the provider, which led to numerous mistakes and letters being undelivered.

A policyholder is time-barred if they do not make a complaint within three years of being warned that the endowment is likely to suffer a shortfall.

Nearly 1m of the UK's 8.5m endowment policyholders are believed to be already time-barred.

Ian Allison, a director with another endowment complaints firm Brunel Franklin, wants the FSA to extend time bar deadlines by a year. The company is also investigating whether it can legally challenge time-barring.

Allison said: 'We think there are possible challenges to the way the letters were served but also their content. We've seen letters that have advised customers to wait and see what happens to their endowment rather than make a complaint.'