Paying compensation
If your customer has lost out as a result of a mistake, you may need to consider compensation. This page will tell you about:
Usually, we’ll tell you to put the customer back in the position they’d have been in if things hadn’t gone wrong.
That can mean awarding money – for example, paying an insurance claim, or refunding a charge. But we may also tell you to do something that doesn’t involve money such as correcting information on a credit file or reinstating a no-claims discount.
And in some cases, we’ll award compensation for the distress or inconvenience an issue has caused your customer.
Types of compensation we can award
The Financial Conduct Authority (FCA) Dispute Resolution RulesLink to the FCA handbook say we can make any or all of the following types of award:
- money awards, including awards for distress and inconvenience
- interest awards
- costs awards
- directions.
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If it’s clear how much your customer lost, we’ll specify the amount you need to pay. If it’s not clear, we’ll usually set out the basis on which your business should compensate a customer, rather than a specific amount.
The limit to how much we can award depends on when the case was brought to us:
- £455,000 for complaints referred to us on or after 1 April 2026 about acts or omissions that occurred on or after 1 April 2019.
- £445,000 for complaints referred to us on or after 1 April 2025 about acts or omissions that occurred on or after 1 April 2019.
- £430,000 for complaints referred to us on or after 1 April 2024 about acts or omissions by firms on or after 1 April 2019.
- £415,000 for complaints referred to us between 1 April 2023 and 31 March 2024 about acts or omissions by firms on or after 1 April 2019.
- £375,000 for complaints referred to us between 1 April 2022 and 31 March 2023 about acts or omissions by firms on or after 1 April 2019.
- £355,000 for complaints referred to us between 1 April 2020 and 31 March 2022 about acts or omissions by firms on or after 1 April 2019.
- £350,000 for complaints referred to us between 1 April 2019 and 31 March 2020 about acts or omissions by firms on or after 1 April 2019.
- £205,000 for complaints referred to us on or after 1 April 2026 about acts or omissions that occurred before 1 April 2019.
- £200,000 for complaints referred to us on or after 1 April 2025 about acts or omissions that occurred before 1 April 2019.
- £195,000 for complaints referred to us on or after 1 April 2024 about acts or omissions by firms before 1 April 2019.
- £190,000 for complaints referred to us between 1 April 2023 and 31 March 2024 about acts or omissions by firms before 1 April 2019.
- £170,000 for complaints referred to us between 1 April 2022 and 31 March 2023 about acts or omissions by firms before 1 April 2019.
- £160,000 for complaints referred to us between 1 April 2019 and 31 March 2022 about acts of omissions by firms before 1 April 2019.
For complaints referred to us before 1 April 2019, our previous award limit applies:
- £150,000 for any complaints referred to us before 1 April 2019.
In cases where we think a customer is due more than the limit, we’ll recommend the additional amount we think you should pay. But we’ll talk to you and the customer about what this means at the time.
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A mistake can affect your customer practically or emotionally, as well as financially. For this reason, we can award fair compensation for any of the following:
- distress
- inconvenience
- pain and suffering
- damage to reputation
We might award this if we feel your customer faced obstacles or difficulties that could have been avoided if you’d handled things differently.
Find out more about our approach to paying compensation for distress or inconvenience.
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We might tell you to pay interest on top of – or as part of – any payment we recommend. We can award interest in three ways:
- As part of the money award itself. For example, we might tell you to refund interest you’ve charged your customer on their mortgage if they were incorrectly paying a higher amount.
- On top of a money award. For example, if your customer was 'deprived' of money lost – meaning they didn’t have it available to use – we can tell you to pay interest on top of the money award.
- After the financial award has been calculated. For example, if there’s an unreasonable delay in settling a complaint following an ombudsman’s decision, we can decide that a different interest rate should start to accrue until the award is paid.
For interest awarded to reflect the cost of being deprived of money we will use the following rates:
- simple interest at the time-weighted Bank of England average base rate plus one percentage point, for complaints referred to us since 1 January 2026 – use our base rate plus one percentage point interest calculator
- simple interest at 8% per year, for complaints referred to us before 1 January 2026 – use our 8% simple interest calculator.
Typically, the interest should be calculated from the date the loss crystallised to the date compensation is paid. If your customer has lost money at more than one point in time, you should calculate interest from the date of each crystallisation to the date of settlement.
If your customer has recovered any loss in the intervening period, you should take that into account in the interest calculation.
Where an ombudsman makes a money award – and your customer accepts their decision – you may also have to pay interest if you don't make the payment by the set deadline. The typical deadline we set is 28 calendar days from the date you're told your customer has accepted the final decision. The default interest rate applied for late payment is 8% simple per year.
There are some situations where we may tell you to pay interest at a different rate, for example, if the customer:
- had to borrow money, we may base compensation on the interest they had to pay on that loan
- had to use money from another account or investment, we may base compensation on the interest or income lost in relation to that other account or investment.
Customers may have to pay tax on the interest.
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Occasionally, we might tell you to reimburse some or all of the costs your customer reasonably incurred. Costs awards aren’t common, but we need to think about what’s fair in each individual case.
Costs awards can also include interest.
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We might decide your business needs to put things right in a way that doesn’t involve paying money – for example, amending someone’s credit file.
Calculating compensation
Sometimes we’ll recommend that you follow a formula to work out the right amount of money to pay your customer.
This might be because the calculations involve information we don’t have, but is on your own systems or available from a third party, such as an actuary.
As an example, where we think you gave your customer unsuitable investment advice, we might tell you to compare the value of the actual investment with a suitable one that was available at the time.
Or, we might ask you to re-work an account – for example if your customer has been charged an interest rate that is too high and they incurred additional charges or costs.
We may tell you the basis on which to pay compensation, but your business is responsible for the accuracy of any payment you make. We’ll always explain the principle behind the calculation, so both you and your customer understand what’s involved.
How compensation is paid
In most cases, you should pay the compensation amount we tell you directly to your customer.
But this isn’t always appropriate. For example, if the customer owes a debt to your business, we might say it’s reasonable to offset any compensation against the debt. We only do this if we think the complaint has been fairly addressed by doing so.
Consumer redress schemes
If there have been widespread regulatory failings by a business, the FCA may require it to enter a consumer redress scheme. This will include a set of rules that the business has to follow when compensating its customers for a specific issue.
If there’s a redress scheme in place, we’ll usually be bound by the rules for that particular scheme. However, this only affects complaints that are within the scope of the consumer redress scheme, so we’ll deal with any other complaints about your business as normal.