Claim quickly if you were mis-sold an endowment

Mortgage borrowers who believe their endowment policies were mis-sold should claim compensation quickly.

A surge in complaints is expected following last week's attack on the financial services sector by the Treasury Select Committee. The MPs predicted that eight out of 10 policyholders could find that their endowment would not pay off their mortgage. The average shortfall is now £5,500 and the crisis could worsen between now and 2013, the peak year for policies to mature.

Yet the homeowners involved need to claim - alleging mis-selling and seeking compensation - within three years of the date they first got a 'red' letter from their endowment provider telling them their policy might not repay the loan on maturity. Since many people got letters in 2002, they must claim in or before 2005. Some people have already run out of time. But under an extension negotiated by the Financial Ombudsman Service (FOS), some could have an extra six months from the time they got a second letter from their insurer. People can also claim if they are within six years of starting the policy.

The first step is to lodge a complaint with the policy provider. Detailed information about the process is available in a free Financial Services Authority leaflet, 'Endowment Mortgage Complaints'. Get a copy by calling 0845 456 1555. The ombudsman service's free leaflet, 'Endowment Mortgage Case Studies', is also useful (0207 964 1234). The service also has a helpline, 0845 080 1800.

In many cases, providers will offer compensation fairly quickly. But if this does not happen - or an offer is made but is considered too low - ask the ombudsman to look at the case. About 50,000 people have asked for reviews in the last year.

Typical compensation is between £2,000 and £3,000. The aim is to put the policyholder in the position they would have been in if they had taken out a repayment mortgage instead of an endowment.

People should seriously consider claiming if they do not know how they can afford to make up the shortfall or were not given clear enough warnings that a shortfall was possible. The MPs say that although up to 60 per cent of endowments were mis-sold, only 6 per cent of the potential victims have so far claimed compensation.

The committee has called for many changes in the wake of this mis-selling scandal, including the end of the time limits on making claims. But any such changes may come too late - if at all - to help people with a problem now.