'I was ill, so I took the first recommendation'

Later this month, customers who were sold endowment mortgages by Barclays or its Woolwich subsidiary will become the first to be shut out. Any complaints received more than six months after warning letters were sent to policyholders (posted in February) will be rejected, regardless of their merits. By early next year, disgruntled customers of Scottish Widows and Standard Life will also find the door closed to complaints, as will policyholder with Friends Provident and Norwich Union.

Time-bars are controversial in the case of endowment mortgages. With these loans, borrowers pay only the interest on what they owe, while making contributions into an endowment policy. This invests in a range of assets, including stocks and shares, in order to build a fund to pay back the capital owed on the mortgage when it falls due.

As share prices began falling, insurers started warning borrowers as long as five years ago that policies might not pay off their home loans in full. But many customers - who claim they were not warned about the risk of an endowment falling short - have only recently become aware of the extent of the problem. Those who can show they were not well-advised may be eligible for a meaningful amount of compensation, if they make a claim in time.

Generally, financial services companies are allowed to turn down complaints if they arrive more than three years after the date that the customer realised there was a problem. In the case of mortgage endowment policies, this is taken to be the first time that customers received a letter warning that their policy was at risk of not paying off their loans.

But last summer, the Financial Services Authority (FSA) introduced new rules. The chief City regulator said that if providers wanted to impose time-bars on endowment mis-selling complaints, they would have to write to customers giving them at least six months' notice of the date from which they would be shut out.

Some insurers, including Prudential and Legal & General, have said they will not impose time-bars, but the majority have not been so generous. Emma Parker, of the Financial Ombudsman Service (FOS), advises any customers who think they have a valid complaint to act fast. And bear in mind that if a provider rejects your complaint, you have a further six months to apply to the FOS for an independent - and free - review of your case.

For those who have missed the complaints deadline, the only hope is legal action. Marianne Fitzjohn, of Endowment Justice - one of several companies that help customers submit endowment complaints - is preparing a class legal action for a group of policyholders who claim they have been shut out unfairly.

Although the FSA maintains it is fair to assume a policyholder will be aware of their endowment shortfall from the moment they receive their first warning letter, Fitzjohn disagrees. She points out that in most cases, these letters included no information about complaining, and no mention of the three-year deadline.

In several other cases, Fitzjohn says her clients never received the first letters. She says: "We've written to the FSA about this. We believe [the providers'] behaviour has been wholly inadequate."

Visit the FSA's website at www.fsa.gov.uk, or the FOS's site at www.fos.org.uk/faq/mortgage.htm.

James Robinson took out an endowment mortgage with Lloyds TSB eight years ago, after being forced to retire from his job on Manchester City Council due to ill health. He used the loan to buy a new bungalow on the outskirts of the city, as well as to make several alterations to the property to ensure it had easy access.

The Lloyds adviser told him that the only mortgage he would be able to get in his condition was an interest-only mortgage, and that he should plough his £30,000-plus savings into an endowment policy.

"They told me it was the only thing I could have, and I was ill, so I just took the first recommendation," he complains.

By 2001, it became clear that his endowment was not going to pay off his mortgage, and after hearing about the problems many other endowment mortgage holders were having, James decided to switch to a repayment mortgage to try to limit the damage.

Three years later he realised he might be able to claim compensation for his mis-sale, but Lloyds said that he was now time-barred. Because he had changed his mortgage, this was the first he had heard of a time-limit on complaints.

Claims-handling agency Endowment Claims is now fighting his case.