Sarah's asking 'What do Trouble and Upset, Distress and Inconvenience, pain, suffering, reputational damage all have in common?'

Not the catchiest title in the world for a blog post I grant you, but still a very important question to ask businesses that are regulated by the Financial Conduct Authority. Because putting it plainly, unless you’re up on the language used by the Ombudsman when it comes to compensation, you could find yourself in something of a jargon swamp.

I’ve seen businesses, particularly the smaller ones with less ombudsman experience, get into this swamp and struggle to unpick the finer points of the terms that are being used. And that’s even before they’ve got into the murkier waters associated with amounts of compensation. But one thing at a time.

In answer to the question I’ve posed, all of these titles refer to money awards (as referenced under the Dispute Resolution rules). The ombudsman is able to make a money award to cover financial losses that have been incurred or are likely to occur in the future because of something the business has or hasn’t done when it should. Basically, in practice this means you need to put the customer back into the position they would’ve been, but for the error. And the losses don’t continue for ever after the mistake, just a reasonable amount of time. That’s the simple bit.

However, and this tends to be where businesses get into a bit of a tangle, money awards can also cover non-financial losses. These can be made up of pain and suffering, damage to reputation or distress and inconvenience, as referenced by the DISP rules, but now called trouble and upset by the ombudsman. Hence, the reason you need to know the lingo when you get something referred to the ombudsman.

But, this is where it all gets a bit subjective, because it not only depends on the nature of the complaint and what’s happened off the back of the error, but also people’s perceptions of money. These can vary wildly, I mean, one person’s £50 for an error is like winning the lottery, but another feels it’s an empty gesture or derisory. It really is a bit of a minefield for businesses. 

During our tenure at the ombudsman we saw so many cases where an award has been offered to the customer and because of simple misunderstandings the business finds itself having to deal with the ombudsman. And on occasions the award was in the right ball park too, so it really was beyond frustrating for all involved. 

So here are our three top tips to prevent you getting into difficulties with the customer when it comes to compensation:

  • Treat every complaint as unique. And what I mean here is that the compensation will be just as unique, even where you’re awarding for trouble and upset.
  • Investigate the complaint thoroughly – in my experience just throwing compensation at a customer without having looked at the complaint properly will likely end up with another complaint or a referral to the ombudsman, if it clearly hasn’t been thought through.
  • Keep it simple. If you try to break that sum down into parts, you’re only going to make a rod for your own back and likely end up justifying one small part of the award you’re offering. And this can often mean the complaint goes to the ombudsman because people have become fixated on one small part of the overall picture.

This really is an area where businesses are consistently baffled by what they should be offering, but with some simple tweaks it can be easily addressed. 

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