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As well as looking at whether someone's lost out financially as a result of a business's mistake, it's important to recognise the emotional or practical impact.

need to know

  • The types of impact to look for include the distress someone’s experienced, any inconvenience they’ve had, any unnecessary pain and suffering, and damage to their reputation.
  • Daily life - and dealings with other people, businesses and organisations - can be inconvenient at times. To award compensation, we’ll need to see that a business’s actions caused more than just a minor inconvenience or upset.
  • On the face of it, some complaints might seem similar to others. But every customer and every complaint is different - and compensation needs to reflect the impact on the individual people involved. We don’t add up awards money for each individual error. Instead, we look at everything that’s happened - and then take a step back and decide what’s fair compensation overall.

our approach


  • what do we mean by trouble and upset?

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    As well as looking at whether someone’s lost out financially as a result of a mistake, it’s important to recognise the emotional or practical impact it’s had. This “non-financial” impact could be:

    • distress - including embarrassment, anxiety, disappointment, loss of expectation, upset and stress. There may be some overlap with pain and suffering (see below) - for example, if the distress made someone ill;
    • inconvenience - including the time someone’s spent and/or effort they’ve had to go to as a result of a business’s mistake;
    • pain and suffering -including physical or mental suffering arising from what a business has done; or
    • damage to reputation - where someone’s personal reputation has been negatively affected as a direct result of a business’s actions.

    The power to make this kind of award comes from the rules that apply to how we work. DISP 3.7.2 R of the regulator’s handbook says we can award fair compensation that’s a proportionate reflection of the impact a business’s actions (or inaction) had on their customer.

    That’s why, in two separate cases where the business made the same mistake, we might award different amounts - because the mistake had a different impact on those individual customers.

  • how do we decide whether to make an award?

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    When we’re deciding how to sort out a complaint, we always consider whether it’s fair to award this type of compensation. It isn’t intended to fine or punish a business - which is the job of the regulator. But when something’s gone wrong, a business’s recognition of the emotional and practical impact can make a real difference - and help their customer move on from what’s happened.

    If we decide a business has acted unfairly, we consider the impact on their customer. We’re all inconvenienced at times in our day-to-day lives - and in our dealings with other people, businesses and organisations. For us to award compensation, we need to decide that the impact of a business’s actions has been bigger than just a minor inconvenience or upset.

    The fact that a phone line is busy or a name spelt incorrectly can be annoying - but we’re unlikely to tell a business to pay compensation for either unless they’ve have a significant impact on a particular customer.

    There are also certain events that are likely to have an emotional impact on someone, whether or not something else goes wrong. For example, making an insurance claim following a death or injury is likely to be distressing. And things like car accidents or break-ins will be inconvenient and upsetting. But these events themselves aren’t the fault of the business - so it’s unfair to ask a business to pay extra compensation to make up for them.

    Similarly, an investor may become very anxious if an investment doesn’t give the returns they expected. But - if the risks were properly explained, the product was suitable and the business administered it correctly - it would be unfair to tell the business to pay compensation, because it’s not responsible for the poor performance.

  • how much compensation should there be?

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    In some cases, it’s enough for us to tell the business to apologise or take some other practical action to put things right - like correcting a credit file. But in other situations, we think that financial compensation is the way to put things right fairly.

    We won’t give a set award for each individual error a business made - and add them together to get a final number. Instead, we look at everything that has happened - and then take a step back and assess what we think would be fair compensation overall.

    Case study 1 and case study 2 show how the same situation could have a considerably different impact on different people. 

  • has the consumer tried to minimise the impact of the problem?

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    When we’re thinking about how someone’s been affected by a business’s mistake, we’ll also look at how much they did to try and minimise the impact of what happened.

    If we think someone could have lessened the impact in some way, we might say it’s fair to award slightly less compensation. But we always bear in mind that the consumer shouldn’t have had to deal with the business’s mistake in the first place.

    Case studies 3, 4 and 5 give examples of the different situations we see.

  • how should the compensation be paid?

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    In most cases, any money we award is payable direct to the consumer (or to their estate if they’ve passed away). 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’ll only do so in cases where we think the impact of the business’s actions has been fairly addressed by doing so.

  • do we award compensation for people's time?

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    Occasionally, we decide that the time someone has spent trying to resolve their complaint means they should be awarded compensation for their time.

    We usually ask people to provide evidence of the time they’ve spent. And to decide a fair amount of compensation, we’ll consider the overall impact that spending this time had on the consumer. We won’t usually award compensation for specific “units” of time (although there have been a few cases where we decided this was necessary).

    Compensating someone 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 financial loss to someone - money they’ve spent trying to resolve the complaint.

  • what about third parties and business customers?

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    If someone has asked a third party to bring a complaint to us on their behalf - or is acting on behalf of their business - this might affect whether we can make an award for trouble and upset.

    third parties

    We can only tell a business to pay compensation for trouble and upset experienced by their customer - not by a third party. For example, we couldn’t award compensation to executors who have brought a complaint on behalf of an estate, or attorneys who have brought a complaint on behalf of someone with a power of attorney.

    But the distress a representative experiences is relevant in some cases. The fact that a representative has experienced distress might in turn cause the consumer distress.

    In some situations, we might decide that making a payment to a third party is a fair way to compensate the consumer. For example, we could tell a business to pay money to a charity of the consumer's choosing if we think that’s appropriate. 

    limited companies

    A limited company is a separate legal entity from the people who run it. If the consumer is a limited company, we can’t compensate the directors or shareholders personally.

    We can make awards for inconvenience - as long as it was experienced by the company itself, rather than the people bringing the complaint. In the same way, a company can’t experience pain and suffering or distress.

    When we’re deciding on fair compensation, we’ll need to 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.

    sole traders and partnerships

    Unlike limited companies, sole traders and partnerships don’t have separate legal identities from the people who run them. So we can approach compensation in the same way as if the complaint had been brought by an individual consumer.

    Case study 6 shows how we awarded compensation to a limited company.

  • how do we decide compensation for mis-selling?

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    If we decide someone has been mis-sold a product or service, we look to put them in the position they’d be in if the mis-selling hadn’t happened.

    In most cases, this will mean looking at their financial position. But we’ll also consider other consequences of the mis-selling - and might say it’s appropriate to make an award for any trouble and upset they’ve experienced.

    This won’t only reflect how the complaint has been handled, but also the impact of the business’s error on their customer.

    For example someone who’s been mis-sold an investment might have been distressed because of the impact of this on their financial security.

    Or if someone’s been mis-sold an insurance policy, they may have had the distress of a claim going unpaid or the inconvenience of having to organise cover with another insurer.

    Case studies 8 and 9 give an examples of where we’d award compensation for mis-selling.


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