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Last Updated: Tuesday, 1 June, 2004, 04:36 GMT 05:36 UK
Endowment policy rules tightened
Couple looking in an estate agent's window
The move is aimed at consumers who want compensation
Regulations have come into force to make sure companies tell people how long they have left to complain about their failing endowment policies.

Over five million people are using an endowment policy to pay off their mortgage, though 80% will be likely to fall short of the required amount.

Once people have been warned of a shortfall they have three years to complain about possible mis-selling.

Firms must state when this period ends, says the Financial Services Authority.

High risk

The authority's rules will require that the period should be at least six months before the policyholder is barred from taking such action.

We are applying these measures to address concerns that some consumers could lose the opportunity to claim
Anna Bradley, director of the Financial Services Authority

Some firms do not impose time limits on endowment complaints they receive.

The warning shortfall comes in the form of a red letter, notifying the policyholder that their agreement is running a high risk and that it will not pay out the target amount at the end of the term.

The revised rules relate to the time limits for consumers to refer mortgage endowment complaints to the Financial Ombudsman Service.

The Financial Services Authority (FSA) has said that by 31 March this year, 452,201 complaints had been made about the mis-selling of endowment policies.

'Improve information'

Anna Bradley, director of the FSA, said: "We are applying these measures to address concerns that some consumers could unwittingly lose the opportunity to claim compensation.

"The change is just one part of a package of measures that we are working on with the industry to improve the regular information provided to consumers about their endowment policy."

Sales of endowment mortgages reached a peak in the late 1980s and the average unpaid debt on a policy is currently 5,500.

So far around 1bn has been given in compensation for the mis-selling of endowment mortgages.


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