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THERE has been a substantial increase in the number of financial services firms that have been ordered to pay compensation to consumers for causing them distress, figures have shown.

The Financial Ombudsman Service said it ordered businesses to pay compensation to consumers for causing them ‘material distress and inconvenience’ in 20,019 cases during the 2010/2011 financial year, compared with 18,511 during the previous 12 months.

But most of the payouts were relatively small at less than £300, and it was only in a small number of ‘exceptional’ cases that compensation of more than £1,000 was awarded.

The Ombudsman said it did not award compensation if consumers had suffered slight inconvenience, such as a busy telephone line or an incorrectly spelt name, but it did call for redress if companies made repeated or aggravated mistakes.

Cases in which compensation was paid for distress ranged from customers having to make several phone calls to close a bank account to having to wait a week for an insurer to arrange a hire car following an accident.