The City watchdog stands accused that it has failed consumers who bought endowment mortgages and are now facing a potential payback shortfall.

The Financial Services Authority failed to respond to the endowment mis-selling scandal and had in effect "fallen asleep off the job", the Consumers' Association said.

The FSA's track record on mortgage endowments represents a series of failures, mistakes and omission

Sheila McKechnie, director, Consumers' Association

As a result, millions of endowment investors were unsure as to their rights to launch an official complaint that could lead to compensation being awarded, the association added.

The CA is attempting to force the FSA to launch an investigation into endowment mis-selling.

But the FSA replied by launched a scathing attack on the CA, accusing it of "ranting".

Watchdog failure

The association has, in an open letter, complained to Chancellor Gordon Brown about what it sees as the FSA's lack of action:

"The FSA has failed to fulfil its two statutory objectives of promoting public understanding of the financial system and securing the right degree of protection for consumers," the association wrote.

The letter also accuses the FSA of "maladministration" which has resulted in consumers receiving "inadequate advice on how to deal with the problem of mis-sold endowment mortgages and shortfalls".

Sheila McKechnie, association director, concluded in the letter:

"The FSA's track record on mortgage endowments represents a series of failures, mistakes and omissions."

Seek compensation

In particular the CA said it was angered that time could be running out for home-owners who were mis-sold an endowment mortgage but who have not yet claimed for compensation.

They have said nothing new at all, our agenda is not dictated by their rantings

FSA spokesman

Under current rules, people who think they have been mis-sold an endowment mortgage have three years, after receiving their first re-projection letter, to seek compensation.

However, many endowment holders received their first re-projection letters - outlining what their policy was likely to be worth at maturity - back in 2000.

In addition, many endowment holders were unaware that they could complain if they felt that any compensation offered for mis-selling was not enough, the association added, blaming the FSA for the gap in understanding.

The FSA should extend the complaints deadline by a year, the association added.

FSA meeting

Reacting to the broadside an FSA spokesman told BBC News Online.

"They have said nothing new at all, our agenda is not dictated by their rantings."

When asked if, as the CA claims, the FSA board were meeting to debate the CA's request, the spokesperson said:

"It may or may not be discussed. However, we do not consider that the consumer is at risk at this time."

A Treasury spokesperson said that they would give the letter "careful consideration."

However, the Treasury spokesperson added that most of the points made in the letter were for the FSA to deal with.