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EU Airline Compensation - How long to payout?

My wife has a claim for compensation in place with Iberia after a cancelled flight from Barcelona to Heathrow in February. (Flight cancelled because delays resulted in plane being unable to make it to Heathrow before it closed for the night) The whole saga was handled very badly by Iberia - i.e. after flight cancellation it took seven hours before she received a hotel voucher (by which time it was 5am in the morning). Anyway, there is a whole sequence of events which I'll be here for days if I go into now, but in a nutshell she eventually got back to Heathrow 22 hours late via Gatwick and a coach.

My question - under the EU regulations is there a time limit for Airlines to respond to claims?

She has spoken with Iberia, and they (somewhat bluntly) told her that it is their standard procedure to respond within 3 months to customer complaints. 3 months seems excessive to me, but I cannot find any guidelines as to the time limit for compensation claims to be settled.

Any advice??

Andy
If you're happy to sell it to me at a price I am happy to pay - then I want it cheaper.
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