As if the mis-selling wasn't bad enough

Firms that mis-sold mortgage endowment policies to many thousands of homeowners are adding insult to injury by employing "sneaky" tactics to cut the amount of compensation they pay. Others are sitting on people's complaints and making them wait months for the money that's rightfully theirs.

A sackful of letters reveals that many Jobs & Money readers are victims of tactics designed to limit or stop compensation payouts. The financial ombudsman says some financial advisers have even gone so far as to threaten their former customers with huge bills to cover fees and costs should they appeal and lose. "Do you feel lucky, punk?" they snarl, despite the ombudsman saying it will report such behaviour to the chief regulator, the Financial Services Authority (FSA), and possibly have their licences taken away.

These financial advisers believe endowments remain a good deal, but they are in a minority. In March, MPs on the Treasury select committee said the true cost to homebuyers of the mortgage endowments crisis now stands at £40bn, and that all the evidence strongly suggested that a large percentage of policies, perhaps as many as 50%-60%, may have been mis-sold. At the last count, eight in 10 endowments sold to cover mortgages were projected to fall short.

The MPs said many companies had made things worse by not handling complaints fairly. Despite that, it appears that in all too many cases, this vital after-sales care is still - to quote the MPs - "spectacularly missing".

Here we look at some of the tactics companies have been using to try to reduce the amounts due to mis-selling victims, and expose some of the worst examples of foot-dragging.

· Some firms have been trying to limit their payouts by arguing they only need to compensate up to the point that they wrote to warn the policyholder the policy may not produce enough to pay off the mortgage. The firms have argued that is the point at which the policyholder should have realised there may be a problem, and, if they didn't take any action to remedy the situation, it's not the company's fault that the losses continued to rack up. The companies have therefore said they don't have to compensate people for any losses they incurred after getting the so-called "re-projection" warning letters.

The Consumers' Association condemned capping as a "really sneaky" practice, adding: "It just smacks of an industry that doesn't know how to treat customers fairly."

The FSA also has some concerns, saying that if the policyholder had complained within three years of getting their first "red" warning letter, "we would not see capping in keeping with treating customers fairly".

One of the insurance companies that has been criticised for limiting payouts in this way is Royal & Sun Alliance. In a statement, the firm admitted it has capped compensation "in some individual cases". However, it added it did not automatically cap its liability at the date of the second "red" warning letter but looked at each case on its own merits.

· Halifax wrote to Mr Weller of North London in February saying it would offer compensation for his Prudential endowment but the calculation could take some weeks. It also said he must appeal to the ombudsman within six months.

He is now six weeks away from the six-month deadline and no nearer a figure. It looks like he will need to trigger a full ombudsman inquiry, adding weeks and possibly months to the process.

In recent weeks Capital Letters has featured several tales of woe from people mis-sold Legal & General endowments who have been waiting and waiting for their money. Typical is the one we related last Saturday of a Teesside reader who first complained in late 2002 but had received a series of letters saying that "owing to service delays ..." the firm had still not yet completed the investigation. After we intervened, L&G promised he would get his cheque plus £100 goodwill. L&G says the difficulties "are now behind us".

· Financial advisers are increasingly using legal tactics to avoid making pay outs, says the financial ombudsman. Jobs & Money reader Jackie Rafferty appealed to the ombudsman and won. The financial adviser fought her all the way. It now threatens a judicial review to overturn the ombudsman's ruling and stop any compensation. The ombudsman has asked the IFA to calculate the compensation, but it has refused.

· An endowment has life insurance built-in, so when it comes to calculating compensation, companies are permitted to deduct the cost of this cover. But if you were young and single with no dependants, you would not have needed it. Or you might already have cover through a pension scheme. Some companies are making a deduction to take account of the expensive life cover arguably even where it wasn't needed.

· Earlier this month it emerged that as many as 700,000 people may have missed out on possible compensation because they had not complained within three years of receiving their first red re-projection letter. The good news is that the furore has prompted some leading insurers, including Legal & General, to announce they will not reject complaints because, technically, they have missed the deadline.

· Some people have lost out on compensation because they bought their policy before April 1988, when regulation kicked in. Most of the big providers have agreed to consider complaints about advice given before that date, says Marianne Fitzjohn at claims specialist firm Endowment Justice (endowmentjustice.com). But if it was bought from an independent financial adviser who is no longer trading, then you will not be able to complain to anyone else.

Penelope Lowndes of Reading has been told by the Halifax it will not consider her claim because "at this time we were not required to offer any advice with regard to the suitability of an investment contract, such as an endowment". She missed the deadline by six months when the legislation bringing in the new rules will have been before Parliament and was known to the industry.

Keep on battling - you can win

Life is getting harder, not easier, for endowment mis-selling victims.

That is the message from scores of Jobs & Money readers who say life insurers, banks and financial advisers are placing every obstacle in the way before paying compensation. And even when compensation is forthcoming, it can be wrong.

But if you keep battling, you can win through.

What if your firm limits their payout by arguing it only needed to compensate up to the point that they wrote to you with a shortfall warning?

This practice has come under fire from the financial ombudsman. The ombudsman service this week confirmed that, as a general rule, it would be unlikely to conclude that a firm could rely on a warning letter as grounds for capping people's compensation in this way. If you complain to the ombudsman it's likely you'll win.

What can you do if a finance company drags its feet?

Keep all correspondence and keep plugging away. Some firms are better than others. The usual principle that those who shout loudest get sorted, applies. To that end, writing to Jobs & Money can help speed things along, (if we are able to look into your case). If your financial adviser obviously objects to any thoughts of mis-selling and threatens legal action, then don't be frightened off.

The ombudsman is aware of firms trying to block compensation. Unfortunately you might need to go to the Small Claims Court to enforce the ombudsman's ruling, though this is relatively straightforward. The ombudsman will offer advice.

What if I didn't need the life cover that came with the endowment?

Tell your insurer. Make it clear in your letter this is another aspect of your complaint. Sometimes it is overlooked. If they still object, take your case to the ombudsman.

If you didn't complain within three years of receiving the first red letter, what can you do?

Technically you are out of time. But controversy over this issue has prompted some insurers to say they will look at all complaints.

You bought your policy before April 1988, when regulation started. Can you still claim?

Yes, some providers will look at old policies.

Others are being difficult. But even in these cases you can appeal to their sense of fair play.

They were supposed to sell products "fit for the purpose".

Probably the most unlucky people are those who bought their policy from a financial adviser who is no longer trading.

If it was before April 1988 there is little you can do.

If it was after August 29 1988 you may be able to make a claim for compensation to the financial services compensation scheme.