If we decide that a financial business has done something wrong – and the consumer has lost out as a result – we tell the business what they should do to put things right.
This includes addressing the non-financial loss caused to a consumer – the emotional or practical impact of the business's mistake. This impact could be:
The rules that set out our powers – the Dispute Resolution (or "DISP") rules – allow us to make this kind of award. The particular rule that applies is DISP 3.7.2 R. Any award we make will be fair and reasonable – and proportionate to the impact a business's actions (or inaction) had on the consumer. This means that in two similar situations, we might award different amounts for the same error – because it has impacted the individual consumers in different ways.
Thinking about the wider impact on the consumer of the business's mistake – beyond simply making sure the consumer isn't out-of-pocket – is an important part of resolving a complaint. The fact a business has recognised the emotional and practical impact of their actions can make all the difference to their customer.
So we always consider whether to make an award for this type of impact – even if a consumer doesn't specifically ask us to. However, these awards aren't intended to fine or "punish" a business for their error – that is the job of the regulator.
Once we have decided to uphold a complaint, we consider the extent to which the business's actions affected the consumer – if they had any impact at all. For us to make an award, we would need to decide that the impact on a consumer has been larger than the usual minor inconveniences and upsets we all have.
So we won't automatically tell the business to pay compensation just because the consumer has experienced some non-financial loss. We're all inconvenienced sometimes in our day-to-day lives – and in our dealings with other people, businesses and organisations.
For example, the fact that a phone line is busy or a name isn't spelt correctly can be annoying – but we're unlikely to award compensation for either unless they have a more significant impact on the consumer.
We also appreciate that making an insurance claim following a death or injury is likely to be distressing. And many other situations giving rise to claims – like car accidents or break-ins – can also be inconvenient and upsetting. However, the events themselves aren't the fault of the business – so it's unfair to ask a business to pay compensation to make up for them.
Similarly, an investor may become very anxious if an investment doesn't produce the return they expected. However – as long as we've confirmed that the risks were properly explained, the product was suitable and the business administered it correctly – it would be unfair to make an award against the business.
In some cases we uphold – once we have made sure the consumer isn't out-of-pocket – we recommend that the business apologise or take some other action to make up for the non-financial impact of their error. However, in many cases, we think that a monetary award is more appropriate compensation for non-financial loss.
We see some cases where businesses have handled complaints very well – trying to resolve them as quickly as possible and restore their customers' trust and confidence in their service.
However, we see some cases where businesses make the original problem worse through poor complaint handling – resulting in further upset for their customer. Handling a complaint poorly might mean:
We have set out some examples of the awards we make – and the circumstances we might award them in.
Miss A complained to her bank that she'd been mis-sold a packaged account.
She didn't receive an acknowledgement or response to her complaint – despite several phone calls. When the bank did send a final response letter, it didn't address Miss A's complaint – as her concerns had been incorrectly recorded as a payment protection insurance complaint. This led Miss A to try and make her complaint again.
We recommended an award at the lower end of our moderate band for the inconvenience Miss A had been caused by the business's poor handling of her complaint.
In each individual case, we will consider how what the business did wrong affected that particular consumer. Case studies two and three show how the same situation could have a considerably different impact on different consumers – depending on their circumstances.
The business sent Mr B's bank statement to the wrong address – meaning that a third party had access to some of his personal and financial information. But the third party returned the unopened statement to the business and no harm was caused.
The business reissued the statement to Mr B's correct address, apologised for its error and offered an amount at the low end of our moderate band. We thought this was fair.
But a similar error had a very different impact on Miss C.
The business sent Miss C's mortgage statement to the wrong address – her previous address, which now belonged solely to her ex-husband. As a result, Miss C's ex-husband found out her new address – and subsequently broke into her home and assaulted her. Miss C had to spend five days in hospital.
Although the error was relatively minor, the impact on Miss C was considerable. We awarded much larger amount – in our extreme band – for the distress and severe physical harm Miss C suffered as a result of the business's actions.
We find some consumers are reluctant to talk about distressing matters – and may understate how much the problem has upset them and the trouble it has caused. However, other people might overstate the impact a problem has had – for example, because they hope the situation will be sorted out more quickly. As well as what the consumer tells us about the impact of the business's mistake, we will always take account of the facts of the case when assessing the impact.
When we look at how much the consumer has been affected by something the business did wrong, we consider the consumer's own actions – and how much they have done to try to minimise the impact of what happened.
If – given all the circumstances of a particular case – we think the consumer could have acted in a way that would have lessened the impact on them, we might decide to award slightly less compensation. But we will always bear in mind that the consumer shouldn't have had to deal with the business's mistake in the first place.
Mrs D's bank made an error processing the monthly standing order that she'd set up to pay her credit card bill. Although the money left her account, it wasn't paid into her credit card account.
Mrs D frequently checked her statements online, and noticed that the payments hadn't been made. So she immediately made a payment through her online banking account to cover the minimum amount before the end of the month. She did the same the next month when the same thing happened again.
After investigating the complaint, the business accepted full responsibility. They apologised, refunded the money (plus interest) to Mrs D's account and offered a moderate award for the inconvenience they'd caused. They also thanked Mrs D for being so understanding and taking steps to avoid additional problems.
By making a payment, Mrs D had avoided being charged by her credit card provider and also avoided late payment information being added to her credit file. This meant it was much easier to resolve the issue, and the impact on Mrs D was much smaller that it would have been if she hadn't taken any action. We agreed that the business's offer was reasonable.
Mr E reacted differently to the same situation – and unfortunately, made the impact much worse.
When Mr E realised there was a problem, he refused to make a payment himself – even though he had money spare to do so. His credit card account consequently went into default – and this affected his credit file.
Although the original mistake was the business's, we thought Mr E could have done more to minimise its impact. So we decided it wasn't reasonable for us to hold the business responsible for the negative information being recorded on his credit file.
Mr F was unhappy that his insurer had taken five months to settle a claim for the damage caused to his home during a break-in.
Mr F needed the money to make repairs and replace the items that had been stolen. Until the claim was paid, he had to live with the damage as a constant reminder of the break-in – which he found very distressing.
However, looking at the case more closely, we found that the business wasn't completely responsible for the delays. They had had to ask Mr F several times for information they needed to assess his claim. All in all, he'd taken over three months to provide the information.
We acknowledged how upsetting the situation had been for Mr F. However, we didn't think the business was responsible for the delay – so we didn't tell them to compensate Mr F.
In most cases, any monetary compensation we award is payable direct to the consumer (or to their estate if they have died). But in some cases, this isn't appropriate.
For example, if the consumer owes a debt to the business, we might say it's reasonable for the business to offset the compensation payment against the debt. But it's very rare that we agree to this – and we will do so only in cases where we are satisfied that it addresses fairly the impact of the business's failings.
Very occasionally, we decide that the time a consumer has spent trying to resolve their complaint means they should be awarded compensation for their time.
We won't usually make a specific award for the "units" of time someone has spent sorting things out – although there have been a few cases where we considered this necessary.
We usually ask the consumer to provide evidence of the time they have spent sorting the problem out. To decide a fair amount of compensation, we will consider the overall impact that spending this time had on the consumer.
Compensating a consumer for their time isn't the same as refunding any costs they incurred when making a complaint – such as the cost of postage or phone calls. These are a direct financial loss – because the consumer has spent the money trying to resolve the complaint.
If a third party brings a complaint to us on a consumer's behalf – or the consumer is acting on behalf of their business – this might affect whether we can make an award for any impact outside of direct financial loss.
We can only make awards for any non-financial impact or loss affecting the consumer themselves. We can't make an award for a third party's non-financial losses. Examples of third parties include executors who have brought a complaint on behalf of an estate, attorneys who have brought a complaint on behalf of a consumer who has made a power of attorney, and directors who have brought a complaint on behalf of a company.
So if a consumer appoints a representative, we can't make an award for any distress the representative experiences. We can only make an award for distress the consumer experiences. However, this doesn't mean the distress a representative experiences is always irrelevant – the fact that a representative has experienced distress might in turn cause the consumer distress.
In some situations, we might decide that making an award to a third party is a fair way to compensate the consumer – looking at the particular circumstances of the case. For example, we could tell a business to pay money to a charity of the consumer's choosing.
If the business's customer is a limited company, we can't compensate the directors or shareholders personally.
A limited company is a separate legal entity from the people who run it. It isn't an individual – so it can't experience pain and suffering or distress. But we can make awards for inconvenience – as long as it was experienced by the company itself, rather than the people bringing the complaint.
But we will also consider the circumstances of the limited company in question. For example, what if it only has one director? In this situation, any inconvenience or loss of reputation may have had a greater impact on the company's operations than they would have had on a larger company.
An estate agent's business account was incorrectly frozen by the business. This meant that incoming and outgoing payments – including rent payments from tenants to the estate agent's landlord clients – were stopped.
The estate agent spent a great deal of time trying to resolve the matter with the business directly – but also in assuring its landlord clients that the issues were not due to any financial difficulty or potential insolvency.
We asked the business to write to the estate agent's landlord clients to confirm that the problems were caused by its error and weren't the fault of the agent. And for the inconvenience caused, we made an award at the top end of our moderate band to the limited company.
Unlike a limited company, sole traders and partnerships don't have separate legal identities from the people who run them. This means we approach compensation in the same way as if the complaint had been brought by an individual consumer.
Damage to reputation may arise because the business's actions resulted in:
When making an award for damage to a consumer's reputation, we will assess the likely impact the damage has had on the consumer. The impact will depend on:
If we can identify specific damage, we might award a substantial amount of compensation for damage to reputation. And as well as asking the business to pay compensation, we will consider, where appropriate, telling the business to minimise the impact of their earlier actions – for example, by ensuring that any negative information wrongly recorded on the consumer's credit file is removed.
Mr J was in a car accident with another driver and made a claim on his insurance. Unfortunately, administrative errors by the insurance company meant a County Court Judgement was issued against him.
We considered it fair to compensate Mr J for the unnecessary and excessive worry the insurer's errors caused him. We also thought it was reasonable for the insurer to compensate Mr J for the embarrassment and damage caused to his reputation – especially because he worked for the police. We made an award in our substantial band.
We often see cases where a consumer says a particular product has been mis-sold by the business. If we agree with the consumer we will look to put them back in the position they would have been in if the product hadn't been mis-sold.
We will also consider what impact the mis-sale had on the consumer – and we might think it is appropriate to make an award for any non-financial loss they have suffered. We won't limit our consideration of whether a non-financial loss award is appropriate to the complaint handling only. The award is intended to reflect the impact that the business's error has had on the consumer.
For example – where an investment has been mis-sold, a consumer might have been distressed due to the impact the business's error had on their financial security.
Alternatively, where an insurance policy has been mis-sold, a claim going unpaid could cause the consumer distress, or they could be inconvenienced by having to organise cover with another provider.
Mr and Mrs G complained that they'd been mis-sold their PPI policy on a loan. Mr and Mrs G believed the policy covered the full term of the loan – but when they made a claim, they found that it only covered the first three years. The claim was rejected, meaning Mr and Mrs G had to find another way of making the loan repayments.
We found that the policy had been mis-sold to Mr and Mrs G – and made an award to compensate them for the financial losses they incurred as a result of this. But we also recognised that when Mr and Mrs G's claim was rejected unexpectedly, they were disappointed and anxious about how they would be able to meet the loan payments. In the end, they had to borrow money from friends and family – which caused them inconvenience and embarrassment. We recommended an award in the mid-range of our moderate band.
Mrs H was a pensioner with a modest pension income and no investments apart from a small amount of savings. When her husband died, she received money from a life insurance policy. When Mrs H visited her local bank branch to pay in a cheque, she was invited to speak to one of the bank's financial advisers to discuss how she could get a better return on her savings. The adviser recommended she invest around three-quarters of her money in a stocks and shares ISA.
Mrs H found out two years later that the ISA was only worth two-thirds of the original investment. She complained to the bank that she hasn't wanted to take any risks with her savings – and the adviser hasn't warned her that she could lose money.
We decided the investment was unsuitable for Mrs H and told the bank to put her in the financial position she would be in if she hadn't been sold it.
But we also recognised that she was very distressed at losing a large part of her emergency fund – and that she'd experienced uncertainty while she didn't know whether she would get that money back. Mrs H was particularly upset because the money had been left to her by her husband to make sure she would cope on her own financially. We awarded compensation at the lower end of our substantial band for the unnecessary distress she suffered.
On the face of it, some of the complaints we look at might seem similar to others. However, every case is different – and it is the impact on the individual consumer involved that forms the basis of how much compensation we award. We have given some examples of awards we might make and why.
We don't go through a mechanical adding up exercise – where we assign a "standard" award to each error the business made and add them together. We will take into account all the relevant factors – and then take a step back and assess what we think would be fair compensation in all the circumstances of the case as a whole.
As well as different bands of award, we have indicated the likely financial range for each particular level of impact. But these are only guidelines – and there are times when we might consider it fair and reasonable to make an award outside of these bands.
contact our technical advice desk on 020 7964 1400