This section of the website describes our approach to telling businesses how to compensate consumers for financial loss.
We do this when consumers have lost out through being "deprived" of money that they should have had – or when consumers have lost money because the business's mistake led them to take out an investment or account that wasn't suitable for them.
If we uphold a consumer’s complaint, our aim generally is to put the consumer into the position they would now be in if the original problem that led to the complaint hadn’t happened.
When we tell a business to compensate a consumer for investment loss or for being "deprived" of money, we also consider whether there was any additional loss to the consumer. We may tell the business to pay compensation for this further loss – sometimes by paying interest and sometimes in other ways.
The following sections provide more detailed information about our approach when we tell businesses to pay compensation in these circumstances.
If we uphold a complaint, we may in some cases tell the business to compensate the consumer for being “deprived” of money that they should have had.
The compensation we tell businesses to pay in these circumstances is usually in the form of interest payable up until the date the money is paid to the consumer.
Our power to tell a business to pay a consumer interest comes from s229(8) of the Financial Services and Markets Act 2000, which says:
A money award may provide for the amount payable under the award to bear interest at a rate and as from a date specified in the award
If we uphold a complaint, and the business fails to pay compensation as directed within 28 days, we may then tell the business to pay the consumer further compensation for the delay in paying the original amount.
There are more examples of where we tell businesses to pay compensation to consumers for being "deprived" of money in our technical note, is compensation taxable?
We usually tell businesses to pay interest at the statutory rate, which is currently 8% simple. When this relates to a period before 1 April 1993, we take into account the fact that the statutory rate was 15% simple at that time.
We use the statutory rate to reflect the fact that:
The courts have not changed the equivalent interest rates that they apply. So there does not appear to be a case for changing this rate at present.
There are some situations where we may tell businesses to pay interest at a different rate – for example:
The date interest runs from depends on the type of policy:
We are unlikely to tell a business to pay a consumer compensation for being "deprived" of money if we agree, in the circumstances of a particular case, that an insurer was entitled to “avoid” a policy and refund the premiums.
We typically tell a business to pay compensation for an investment loss when we decide that the business’s mistake led a consumer to take out an investment or account that wasn’t suitable for them. Compensation of this type is usually based on what would otherwise have happened to the consumer’s money.
In assessing compensation, we take into account what the consequences would have been if:
There are examples of where we tell a business to pay compensation for the consumer being put in the wrong investment or account in our technical note, is compensation taxable?
In these cases, we usually tell the business to pay compensation for the consumer’s investment loss up to the date of the encashment, sale or maturity of the investment – together with compensation for being "deprived" of that amount from that date until the date of payment.
The loss crystallises at the date the investment matured or was surrendered or cashed. Interest is then added to that sum until the date of payment. There is more information about the rate we use in the section above.
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This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.