What is financial mis-selling, and how does redress work?
Selling a financial product in a way that breaches regulatory requirements — typically through unsuitable advice, inadequate disclosure or unfair pressure — and redress is the process of putting the customer back in the position they would have been in.
What counts as mis-selling:
Unsuitable advice, where a recommended product did not meet the customer's needs, circumstances or risk tolerance.
Inadequate disclosure of risks, charges, exclusions or commission.
Selling a product the customer could not benefit from — the classic example being payment protection insurance sold to people ineligible to claim.
Failure to assess affordability before lending.
Pressure or inertia selling, including automatic inclusion requiring active opt-out.
Misrepresenting what a product does.
The major UK episodes: payment protection insurance, which produced the largest redress exercise in UK financial history; pension transfer advice, particularly relating to defined benefit schemes; endowment mortgages; interest rate hedging products sold to small businesses; and high-cost credit affordability failures.
How redress works, step by step:
Complain to the firm first. This is required before escalating, and firms have eight weeks to respond with a final response.
Escalate to the Financial Ombudsman Service if unsatisfied — free to consumers, generally within six months of the final response. The Ombudsman decides on what is fair and reasonable in the circumstances, which is a broader test than strict legal rights, and its decisions bind the firm if accepted by the consumer.
FSCS covers cases where the firm has failed, with compensation limits.
Redress calculation aims to restore the position — refunding premiums and charges, adding interest, and compensating consequential loss, sometimes with an amount for distress and inconvenience.
What to be wary of: claims management companies charging a percentage of redress for work you can do yourself for nothing. Complaining is free and does not require representation, and the Ombudsman deals with consumers directly.
Time limits are important — generally six years from the event or three years from when you reasonably became aware, with some exceptions.
Keep records, since documentation strengthens a complaint considerably.
General information, not financial or legal advice.