We’re back talking about awards again this month, because we know from speaking to businesses that awards, particularly Distress and Inconvenience, still leave people feeling a bit lost. And with that in mind, it feels timely to start to mapping out DISP to see what it says, and then we have the rest of the month to cover what it doesn’t.
Taking it from the top
To be fair, it gives you a few clues in terms of what to expect, but like any map without much features on it, you’re quickly going to lose your way, take a wrong turn and likely end up in a tangle that still leaves you feeling utterly lost.
So let’s take it from the top, because the highest of high levels is outlined under DISP 3.7.1, which gives four types of award, specifically:
Most of you will be familiar with all of these no doubt, especially if you’ve dealt with the ombudsman on a number of occasions in the past. If, you haven’t though, or you need a refresher, let me quickly buzz you through them, starting with the easy ones.
Before I do though, the main thing to think about when it comes to awards, with the exception of money awards (we’ll come on to those at the end), is to think about how you can place the consumer in the position they should’ve been in, but for the error. It should be the starting point when you realise that the complaint needs to be upheld.
Costs are awarded for losses that have been incurred by a customer as a result of the issue that is being complained about. It might be that it’s fair to add interest to these costs as a result of the consumer having been deprived of that money.
Examples of costs can be varied, but let’s use an example so you can get a grip on it. Mr W’s payment for their mortgage is claimed in error by their mortgage lender, when they were meant to have been on a repayment holiday. The customer has entered into an un-agreed overdraft and isn’t able to cover the money from savings. As a consequence they have incurred interest on this amount, while they have been trying to contact their mortgage lender to get the money returned.
In this example the costs would include the overdraft interest, any fees that the customer’s bank may make and telephone costs while the customer has been trying to speak to his mortgage lender to get the money back. Of course, you’d be asking for evidence, but in principle, this could all be covered.
And just as an aside, DISP also states that ‘in most cases’ customers shouldn’t need to have a professional adviser to make a complaint to the FOS, so it states that an award to cover such costs are ‘unlikely to be common’. So, if you’re asked about covering such costs, you are entitled to consider whether the consumer actually needed that help or not before deciding whether to make that offer.
Interest awards always cause a bit of controversy when it comes to the 8% interest rate that the ombudsman service uses. And certainly in the current climate we can see why, because put simply there isn’t a savings rate that comes close to offering a return like this.
So where does it come from then? The 8% is actually a rate a court would award, and that’s why the Ombudsman offers the same. But where does it state that this is reasonable in DISP? It doesn’t instead DISP states that interest can be added to a money award ‘at a rate and as from a date specified in the award’ and that it can be payable at a rate specified in the award ‘on any amount which is not paid by the date specified in the award’.
Let’s pick this apart, because it actually covers two scenarios. The first scenario is the award of interest by an Ombudsman – at a rate they specify and from a date they specify. By way of an example, it could be that the ombudsman looks at the mortgage example and decides Mr W is due interest from the date the payment left his account to the date it was finally returned. Simple!
The second scenario would be where the business failed to make the payment to Mr W within 28 days of the Final Response. So, it would mean that it incurs interest, at 8% for the time it hasn’t made settlement over the 28 day deadline.
These are probably the simplest sort of awards in terms of understanding what the ombudsman wants you to do, but they can cause issues where what the ombudsman wants you to do, isn’t possible.
If this is the case, then get in touch with them to talk through the practicalities and explain why what they want you to do isn’t possible.
This is perhaps the meatiest part of the awards section of DISP 3.7, because there is a mass of stuff to get through in terms of what the money award can do, maximum awards and the like. But, we’re going to stick with what the money award does.
According to DISP, a money award can include redress for ‘pain and suffering’, ‘financial loss’ (which includes consequential or potential losses as a result of the issue that is being complained about), ‘damage to reputation’ and ‘distress and inconvenience’. That’s great, but how the heck do you know what the right amount is?
And that right there is the million dollar question isn’t it?! DISP doesn’t give guidance on what the ‘right’ amount is, otherwise you’d be looking at the longest set of principles there has ever been. And anyway each complaint and each customer is unique. It’s for that reason that it’s not always as simple as offering £100 and the customer accepts. There are many things to think about when it comes to money awards, and that’s why we’re going to be covering this topic again this month and probably again in the future…
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