This section answers a number of frequently-asked questions (FAQs) about:
will the ombudsman check that compensation calculations have been carried out correctly?
Where we decide that a financial business has done something wrong and the consumer has lost out as a result, our approach – as a rule of thumb – is to tell the business to do what's necessary to put the consumer in the financial position they would be in, if things hadn't gone wrong in the first place. What this means in each individual case can vary significantly.
In some cases, it can involve telling the business to pay the consumer a particular sum of money that we specify – for example, the amount involved in a disputed cash withdrawal. In other cases, it can involve telling the business to carry out a particular action – for example, correcting a credit reference file or paying an insurance claim.
In some of our decisions we set out the basis on which a financial business should compensate a consumer – rather than specify the actual sum they should pay. This is generally because the calculations will involve information that we do not hold ourselves. It could be information that the business will need to extract from its own systems – or data that it will have to obtain from third parties such as actuaries or other specialists.
We often set out the basis for compensation in these cases as a formula (for example, the formula for compensation for a "churned" endowment policy. This is why this kind of decision is sometimes called a "formulaic award".
Like a court, where we tell a financial business the basis on which to pay compensation, we do not as a matter of course check the individual details of the calculations subsequently carried out by the business. However, we aim to make sure that we explain the principle behind the calculations clearly and succinctly, so that consumers can understand the overall approach and the various stages and processes it will involve.
It is very important that consumers understand and agree how we intend things to be put right for them – even though they may not be able to perform the more complex calculations themselves or know exactly what the final figure will be.
Once a financial business has carried out the calculations, if a consumer has a specific concern about them, we can have a look at what the business has done, to see whether it has followed what we told it to do.