This guide is maintained as a current resource for July 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.
Understand how to claim interest on compensation for mis‑sold products in England and Wales. This guide explains when interest can be included in mis‑selling claims, how it is calculated, relevant legal principles, practical steps to pursue interest with compensation, and key time limits.
Consumers and small businesses in England and Wales often face financial loss when products are mis‑sold. “Mis‑sold” in this context means a product was sold in a misleading, unfair, unsuitable, or non‑transparent way. Typical examples include mis‑sold financial products such as payment protection insurance (PPI), mortgage endowment policies, or hidden commissions built into credit agreements. In many disputes, claimants are not only concerned with recovering the amount paid but also with claiming interest on that amount. This article explains your rights under consumer and contract law, how interest can be claimed as part of a compensation claim, the relevant legal principles, and the practical steps to take.
What Does “Mis‑Sold” Mean?
A product is mis‑sold when it has been sold in a way that breaches statutory provisions, professional standards, or fair dealing principles. Common mis‑selling situations include:
- Financial products sold without clear explanation of risks, costs, or suitability. For example, PPI sold without clear disclosure of terms.
- Credit products sold with hidden or undisclosed commissions embedded in the interest rate.
- Complex financial agreements such as interest rate hedging products sold without adequate explanation of potential adverse outcomes.
Mis‑selling often leads to compensation claims where claimants seek financial redress to restore them to the position they would have been in had the product not been mis‑sold.
Interest on Compensation Claims - Legal Principles
When you recover money because a product was mis‑sold, it may be possible to seek interest on that amount. The purpose of interest in this context is to compensate for the loss of the use of your money over the period it was unjustly held.
1. Interest in Court Claims
If you issue a money claim through the civil courts (for example through Money Claim Online, the County Court or High Court), you can often ask the court to award interest on the compensation from a specified date to the date of settlement or judgment. The law allows:
- Pre‑judgment interest: interest running from the date the debt first became due until judgment.
- Post‑judgment interest: interest running after a judgment has been entered until the debt is paid.
The court has discretion to award interest and will consider factors including when the money was owed and fair compensation for the delay.
2. Statutory Interest Rates
Where a claim does not specify an interest rate in the contract, and the claimant seeks statutory interest, the court normally awards interest at, or about, 8% per annum unless the circumstances suggest otherwise. The exact rate and calculation period will depend on the nature of the debt and whether the claim is for a “specified” or “unspecified” amount.
In many consumer mis‑selling claims, if you ask for an unspecified amount, the court can calculate interest for you. If the claim is for a fixed amount, you may need to calculate the interest yourself before submitting your claim.
3. Interest in Specific Mis‑Selling Redress Schemes
In certain large‑scale redress processes, such as compensation schemes organised by the Financial Conduct Authority (FCA) for mis‑sold car finance, interest is included automatically at a minimum rate (for example, at least 3% per year) to ensure claimants are put back into the position they would have been had the product been sold fairly.
4. Tax Treatment of Interest in Redress Payments
For some types of financial mis‑selling compensation (such as pension or investment products), interest included as part of the redress payment may be subject to tax under UK tax law, depending on how it is characterised for tax purposes.
Practical Steps to Claim Interest on Mis‑Sold Products
Step 1: Identify What You Are Owing
Assess the redress you are seeking:
- Refund of payments you made because of the mis‑sold product.
- Compensation for financial loss due to the mis‑selling itself.
- Interest on that redress, to account for the time your money was held or lost.
Strong documentation helps demonstrate both the mis‑sale and the period for which interest is claimed.
Step 2: Try to Resolve Before Court
Contact the provider or seller with a formal complaint that specifies:
- The mis‑selling issues.
- The remedy sought, including a request for interest.
- The legal basis for your claim (e.g., Consumer Credit Act, unfair terms, or misrepresentation).
If the seller acknowledges the mis‑selling, negotiation might achieve redress without formal proceedings.
Step 3: Use Alternative Dispute Resolution
If the dispute involves a regulated financial product and negotiation fails, you may refer the complaint to the Financial Ombudsman Service (FOS). The Ombudsman can award compensation and interest where appropriate. Redress under FOS typically aims to put you back into the position you would have been in but does not exceed that position.
Step 4: Issue Court Proceedings
If negotiation or ombudsman processes do not resolve the matter, you can start a claim through:
- Money Claim Online (MCOL) for lower‑value claims.
- County Court or High Court for higher‑value or complex disputes.
In your claim documents, clearly include interest as part of the relief you seek. Provide dates from when interest should run, such as the date of payment or the date the redress became due.
Time Limits and Limitation Periods
Time limits apply to mis‑selling and interest claims, usually under the Limitation Act 1980:
- Contractual and misrepresentation claims: typically you must start proceedings within six years from the breach or misrepresentation.
- Interest claims tied to debt recovery often follow similar limitation principles.
Failing to act within the relevant period can bar your claim permanently.
Common Questions About Mis‑Sold Products and Interest
Can interest be compounded?
In most civil court claims in England and Wales, interest is awarded on a simple basis, unless the contract or statute provides otherwise.
Does the interest rate change?
The court can exercise discretion. Where statutory interest applies, a standard rate is used. If a contract sets a specific interest rate, that may influence the award.
Is interest automatic?
Interest is not always automatic. You should expressly state that you seek interest in your claim or settlement proposal. This ensures the court or opposing party considers it.
Key Takeaways
Claims for compensation arising from mis‑sold products in England and Wales may include an entitlement to interest on the redress. The legal framework allows interest awards where money was owed and unpaid, either through court proceedings or broader redress schemes. Interest compensates for the period your money was held unjustly and can form a significant part of the remedy in mis‑selling disputes.
Practical steps involve assessing your claim, documenting evidence, engaging with the provider, using dispute resolution mechanisms like the Financial Ombudsman Service where relevant, and, if necessary, issuing court proceedings. Be mindful of applicable time limits and state clearly when and how interest should be calculated.
