This guide is maintained as a current resource for September 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Learn how to claim interest on mis‑sold product compensation in England and Wales. This comprehensive guide explains when you are entitled to interest, how it is calculated by the Financial Ombudsman Service, and step‑by‑step how to pursue interest on mis‑selling compensation through complaints and escalation procedures, with clear practical guidance for consumers and solicitors alike.
When a product - especially a financial product - has been mis‑sold in the UK, consumers can often claim compensation not only for their direct financial loss, but also for interest that reflects the loss of the use of money over time. Interest can be a significant addition to the compensation you receive and is a recognised part of UK redress processes, particularly in financial mis‑selling complaints handled by firms or by the Financial Ombudsman Service (FOS).
This guide explains how interest on mis‑sold product compensation works in England and Wales, what legal and procedural frameworks apply, and how you can pursue such interest when seeking redress.
1. What Mis‑Selling Means and When You Can Claim
Mis‑selling occurs when a company sells you a product or service in a way that is unfair, misleading, incomplete, or unsuitable for your needs. There is no single statutory definition in UK law, but mis‑selling is widely recognised across financial, consumer credit, insurance, investment and related markets.
Common examples include:
- Financial products where key risks or costs were not explained (e.g. car finance, pensions or investments).
- Undisclosed commissions or fees that increased what you paid without your knowledge.
- Unsuitable advice where a product was recommended without regard to your circumstances.
If you suffer financial loss because of mis‑selling, compensation may be due - including interest that reflects the period you were deprived of your money.
2. Legal Framework for Interest on Compensation
A. Financial Ombudsman Service (FOS) Awards
When you pursue a complaint about financial mis‑selling - for example through the Financial Ombudsman Service - the ombudsman can award compensation and interest to put you back in the position you would have been in but for the mis‑selling.
For complaints referred from 1 January 2026 onwards:
- FOS generally expects the business to apply a time‑weighted average Bank of England base rate plus one percentage point, calculated on a simple (non‑compounded) basis, to compensate for being deprived of the use of your money over the relevant period.
- Where a complaint was referred before that date, the previous default was typically 8% simple interest per year, although specific circumstances might justify a different approach.
- Interest may also be awarded to reflect delayed payment where the business does not pay within the deadline set by the ombudsman decision (commonly 28 days from acceptance).
The FOS considers the facts of each case to decide whether interest should form part of the award and at what rate.
3. How Interest is Calculated in Practical Terms
Interest on mis‑sold compensation is a simple calculation rather than compound. It aims to compensate for the loss of use of your money, rather than to punish the seller.
Key Principles
- Interest Period: Usually runs from the date your loss arose (for example, when you overpaid or were charged unduly) until the date compensation is paid.
- Rate: For FOS decisions after 1 January 2026, the rate is typically the average Bank of England base rate during the relevant period plus one percentage point.
- Simple Interest: Interest is calculated on the principal amount only, not on accumulated interest.
Example: If £1,000 of compensation is due, and you were deprived of that money for five years with a time‑weighted average base rate of 3% plus 1%, the interest element might be calculated at 4% simple interest per year for five years (4% × 5 × £1,000 = £200 extra).
4. Steps to Claim Interest on Mis‑Sold Compensation
Step 1 - Identify that Mis‑Selling Occurred
First, confirm that the product or service was mis‑sold. This typically involves:
- Reviewing contract terms and promotional materials
- Establishing how you were told the product would perform
- Gathering evidence (e.g. emails, account statements) that supports your claim
Step 2 - Complain to the Provider
You should first submit a formal complaint to the company that sold you the product. Most firms must have a published complaints process and a defined timeline (often eight weeks) to respond.
In your complaint, state that:
- You believe the product was mis‑sold
- You seek compensation for financial loss
- You are claiming interest to reflect the time you were deprived of your money
Be clear and provide supporting documents.
Step 3 - Escalate to the Financial Ombudsman Service
If the provider's final response is unsatisfactory, you can escalate to the Financial Ombudsman Service. This step is free and independent, and FOS has broad powers to award compensation and interest where appropriate.
When preparing your FOS complaint:
- Include copies of all correspondence with the provider
- Explain why you disagree with the provider's decision
- Request that interest be included as part of redress
Step 4 - Accept and Enforce the Decision
If the ombudsman awards compensation with interest and you accept it, the provider must comply. If they fail to pay within the timeframe specified by FOS, additional interest for late payment may be applied.
5. Time Limits and Practical Considerations
Limitation Periods
Under general UK civil procedure rules, claims for breach of contract or mis‑selling should ordinarily be brought within six years from the date of the breach or from when you discovered it. This may affect court proceedings. There is no specific shorter “deadline” for complaints to FOS provided the complaint is made within FOS's rules (typically within six years of loss or three years from becoming aware of the problem).
Evidence
Good evidence is critical. Keep copies of all agreements, bills, statements, correspondence and notes of conversations with the seller.
Professional Help
You may ask a solicitor, consumer advice centre, or advocacy organisation for assistance. They can help you frame complaints, explain your rights, and gather evidence.
6. Summary
Claiming interest on mis‑sold product compensation in England and Wales involves:
- Understanding whether mis‑selling occurred and documenting your loss.
- Complaining directly to the seller and requesting compensation including interest.
- Escalating the complaint to the Financial Ombudsman Service if necessary, where interest can be awarded at a rate reflecting deprivation of money.
- Paying attention to evidence, time limits, and procedures to ensure your claim is effective.
Interest is a recognised part of redress where you were deprived of funds due to mis‑selling and can significantly increase the compensation you receive when correctly claimed.
