Paying compensation for distress or inconvenience
On this page you'll find information for financial businesses about our approach to making compensation awards for distress or inconvenience, including:
As well as awarding money – for example, paying an insurance claim, or refunding a charge – 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.
In some cases, we’ll award compensation for the practical and emotional impact your mistake may have had – for example, for the upset an issue has caused your customer.
We can award fair compensation for any of the following:
- distress
- inconvenience
- pain and suffering
- damage to reputation
More detail about the ways we can ask a business to resolve a complaint are set out in the Financial Conduct Authority's (FCA) handbook.
We have separate guidance available for consumers, that sets out what we take into account when you make a complaint.
When we might award compensation
We will make an award if we feel your customer faced obstacles or difficulties that could have been avoided if you’d handled things differently. For example:
- A customer had to contact you repeatedly to get something quite basic sorted out. For example, their address wasn’t updated when it should have been. They have not lost any money, but they had to spend more time and effort sorting this out than it should have needed.
- You underpaid your customer's pension for a significant amount of time, meaning they experienced reduced living standards. This is likely to have caused considerable long-term distress.
We share further detail, including some case studies, in the examples listed below. The examples give a broad overview of the things we think about when deciding fair compensation. But it's important to remember that we review each case on its individual merits – and consider the impact caused to the particular consumer specifically.
Our Business Support Hub can give businesses and complaint handlers general information on how the Financial Ombudsman might look at a particular complaint.
When we might not award compensation
We're all inconvenienced at times in our day-to-day lives – and a certain level of frustration and minor annoyance is expected. So for us to make an award we'd need to see that the impact of a mistake was more than someone would expect to experience as part of everyday life.
For example, we're unlikely to award compensation for minor delays due to a business's phone line being busy, or for a typo in a letter, if it doesn't change the meaning.
We also don't compensate for the impact of events that were outside of the business's control, or for the effects of a third-party's action. For example, a customer might need to make a claim on their home insurance following a burglary. The event itself is distressing, but we wouldn't ask the insurer to pay compensation for the impact of the burglary.
However, if the claim wasn't handled properly, we might consider compensation for the extra upset this caused.
Read some case study examples of awards for distress and inconvenience.
What we take into account
When we look at a case, we'll consider everything that's happened. If we decide to award compensation, we’ll say what level of award would be fair overall to put right the impact a mistake(s) had on the individual.
Customers that are vulnerable could be more severely impacted by a mistake. If that’s the case we’re likely to consider a higher award to reflect this, particularly if the business was aware of its customer circumstances.
The same mistake could affect people in different ways for other reasons. So we might award different amounts in similar cases. Below is an example where the same mistake happened to two individuals, but the impact on their lives significantly differed, which we had to take into account when making our decision.
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A business sent Susan’s bank statement to the wrong address. The letter is picked up by a neighbour, who doesn’t open it but tells Susan. Susan complains as the business put her information at risk. The impact to Susan is the worry about what could have happened. We’d have to gauge just how much worry was caused to decide whether compensation was appropriate. If a consumer had recently had their identity stolen then this mistake could cause them to worry more. But generally speaking, stress caused by something that might have happened, but didn’t happen, wouldn’t usually warrant a large award.
Another business made a similar mistake. They wrongly sent information about a consumer to a relative's address. The letter is picked up by the relative, who accidentally opens it believing it’s for them. The relative tells the rest of the family about the consumer’s finances, causing a dispute. The impact to the consumer is the distress caused by the family dispute. The business’s mistake, though the same as in the above scenario, has had more distressing ongoing ramifications – and would likely result in a higher award.
We may ask your customer for:
- Details about what they did to sort out your firm’s mistake and how long this took. We don’t usually look at things like someone’s hourly rate, but we do consider the wider impact of the mistake, for example, whether your customer had to take unpaid leave.
- The impact on their health and for more details to show how they've been affected.
- Whether they could have done anything to reduce the impact of your business’s mistake. If we agree there were steps the customer could have taken, we might decide it's fair for a business to pay less compensation. A mistake can start a chain of events and so we need to carefully consider the circumstances and decide what impact resulted from the original mistake.
Complaints made on behalf of someone else
We don't normally pay compensation to someone else complaining on a customer's behalf, for example, a family member or solicitor.
We also can't compensate executors personally, as they only represent an estate.
Complaints made by business customers
Certain entities can't experience distress, for example, if the customer is a:
- business
- charity
- trust
In those cases we’d consider whether an award for the inconvenience caused to them, or any damage to their reputation, would be appropriate.
Examples of awards for distress and inconvenience
The amount we award will depend on the individual circumstances. Here are some examples of the range of awards we might make.
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Typically, an apology or small monetary award of less than £100 will fairly compensate a one-off incident or occurrence, such as a small administrative error or a short delay. An apology is usually enough to remedy these types of mistakes, as long as they cause minimal impact and are put right quickly.
Using financial services won’t always be hassle free. We wouldn’t award for things that aren’t more serious than the normal nuisances of everyday life. Just because there’s been a mistake it doesn’t necessarily mean that we would always award compensation, especially when the impact is minimal
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An apology won’t be enough to remedy the mistake if:
- an error has caused more than reasonable levels of frustration and annoyance you might expect from day-to-day life
- the impact has been more than just minimal
An award between £100 and £300 might be fair where there have been repeated small errors, or a larger single mistake, requiring a reasonable effort to sort things out.
These typically result in an impact that:
- lasts a few days or even weeks
- cause either some distress, inconvenience, disappointment or loss of expectation
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An award of over £300 and up to around £750 might be fair where the impact of a mistake has caused:
- considerable distress, upset and worry
- significant inconvenience and disruption that needs a lot of extra effort to sort out
Typically, the impact lasts over many weeks or months, but it could also be fair to award in this range if a mistake has a serious short-term impact.
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An award of over £750 and up to around £1,500 could be fair where the impact of a business's mistake has caused:
- substantial distress, upset and worry
- potentially serious offence or humiliation
There may have been serious disruption to daily life over a sustained period, with the impact felt over many months, sometimes over a year. It could also be fair to award in this range if the business's actions resulted in a substantial short-term impact.
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An award of over £1,500 and up to around £5,000 is appropriate where the mistakes cause:
- sustained distress, potentially affecting someone’s health,
- severe disruption to daily life typically lasting more than a year
A mistake that has an extremely serious short-term impact could also warrant this level of compensation, although you would usually expect some ongoing or lasting effects.
Examples at the higher end could include where the effects of the mistake:
- are irreversible
- have a lasting impact on someone’s health
- resulted in a personal injury
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Our highest awards, for the most extreme impact we see, go beyond £5,000.