Tuesday, 26 February 2013

Questions (218)

Ciaran Lynch


218. Deputy Ciarán Lynch asked the Minister for Finance if he will review the situation whereby in the case of alleged miss-selling of endowment mortgages the consumer is not entitled to make a complaint to the Financial Services Ombudsman because of the six year rule; his views on whether it would be more appropriate that, in this case, the six year period run from the date of maturity of the policy rather than the date of commencement of the policy; and if he will make a statement on the matter. [10197/13]

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Written answers (Question to Finance)

Firstly, I must point out that the Financial Services Ombudsman is independent in the performance of his statutory functions and it would not be appropriate for me to comment on his work.

The Financial Services Ombudsman Bureau was established under the Central Bank and Financial Services Authority of Ireland Act 2004. This legislation provides the Financial Services Ombudsman with various powers in order to determine jurisdiction on a complaint. Included in this is a statutory timeframe, Section 57BX (3)(b) provides:-

"A consumer is not entitled to make a complaint if the conduct complained of - occurred more than 6 years before the complaint is made."

The legislation prohibits the Financial Services Ombudsman from examining any aspect of a complaint where the conduct being complained of occurred more than 6 years from receipt of the Complaint in his Office. If the conduct being complained of occurred 6 year before the complaint is submitted to the Financial Services Ombudsman, the Ombudsman has no discretion in examining such a case.

I understand from the Central bank that where the proceeds of an endowment policy are insufficient to repay the capital element of an endowment mortgage, borrowers should be given ample time to make alternative repayment arrangements. Borrowers are afforded the protections of the 'Code of Conduct on Mortgage Arrears' in cases where the mortgage is in arrears or in pre-arrears and is secured by the borrower’s primary residence.

When the risks associated with endowment mortgage products were highlighted in the 1990s, specific provisions were incorporated into the Consumer Credit Act 1995 which require warnings to the effect that the proceeds of a policy may not be sufficient to repay a mortgage. Under the provisions of the Act, endowment mortgage savings plans must be reviewed by the life company at least every five years to check if the plan is on track to repay the mortgage. A statement setting out the estimated revised valuation of the endowment policy at maturity must be issued by the insurer to the borrower. If the policy is not on track to repay the mortgage, the life company will recommend an increase in the premium.