Whenever a customer complaint is upheld by the FOS, it will consider whether to make an additional award for distress and inconvenience caused by the firm – even if the consumer has not specifically asked it to do so.
In exceptional cases, it may award compensation even if the complaint is not upheld but the firm handled the complaint particularly badly.
The FOS explains its approach to such claims in a technical paper that was updated last month. Unlike a court, which can only award damages for distress and inconvenience where the purpose of a contract was to provide pleasure, relaxation or peace of mind, the FOS decides each case on what is fair and reasonable in the circumstances.
"We usually consider it fair that a financial business which has caused material distress or inconvenience or other non-financial loss should be required to pay reasonable compensation for that", the paper states.
Awards range from less than £300 for relatively minor inconvenience, such as repeatedly getting an address wrong, to over £1,000 in exceptional cases, such as disclosing a consumer's address to her violent, estranged partner.
Mid-range examples include causing distress to a widow by repeatedly addressing letters to her deceased husband about the life insurance claim, and failing to provide alternative accommodation so a family had to live in their property for a month without essential facilities. In each of these cases, the additional compensation was between £300 and £1,000.
The paper confirms that this type of award will only be made if the business has itself caused the distress or inconvenience through some error or failure. Insurance claims, for instance, are often made in difficult circumstances following a death or accident, but this is not something for which the insurer can be blamed.
Nor will the FOS award compensation where the degree of inconvenience or distress appears to be trivial.
"Usually, the question of awarding compensation only arises after a business, or its appointed agent, has breached a duty or been responsible for maladministration in its dealings with the consumer," states the paper. "'Maladministration' might include delays, clerical or procedural errors, rudeness, incorrect or inadequate explanations or simply a failure to respond to the consumer's reasonable requests."
Want more content like this? This story was written by the insurance and reinsurance legal experts at Pinsent Masons, the law firm behind Out-Law.COM. See our legal info for Insurance and Reinsurance.