What Is Financial Mis-Selling?

Have you ever discovered that you had an insurance policy you didn’t know about, or found out it didn’t provide the coverage you were led to believe? If so, you may have been a victim of financial mis-selling. 

With the Financial Ombudsman receiving 74,645 complaints about financial products and services between April and June 2024 alone, financial mis-selling is an issue that affects many consumers. 

But what is financial mis-selling, and how does it affect those who place their trust in financial advisers or products?

In short, financial mis-selling is a dishonest practice in which a financial product or service is intentionally misrepresented, or a customer’s suitability for that product or service is misleadingly portrayed.

If you believe you have been a victim and can demonstrate that you were misled, you may be eligible to recover the payments that you have made.

We’ll look at some examples of financial mis-selling below, including what you can do if you believe you have been a victim of this unethical practice.

Understanding Financial Mis-Selling

Mis-selling is a major concern within the financial services sector, involving issues with financial industry regulators.

Mis-selling can occur with many financial products, including insurance, mortgages, and annuities. Notably, a financial loss is not always necessary to define mis-selling, even the sale of an inappropriate product is grounds for concern. 

Financial Mis-Selling Tactics

Financial mis-selling can take various forms, but some common tactics include the following:

• Pressure Sales Techniques: Mis-selling often involves high-pressure sales tactics to push you into hasty, unwise choices. Remain cautious if a salesperson creates a false sense of urgency or is rushing you to make a quick decision.
• Unsolicited Offers: Receiving unexpected calls or emails offering financial products you did not request could signal potential mis-selling. Reputable advisers generally do not approach potential clients without prior engagement.
• Unrealistic Promises: Legitimate investments always involve some level of risk, and no one can offer guaranteed profits without the possibility of loss. Be sceptical of products that claim guaranteed high returns with no risks.
• Unclear Terms and Conditions: Agents that use confusing language or fail to explain the details of an insurance policy clearly may be trying to obscure important information. Always ask for clarification if you do not fully understand any terms. 

Examples Of Financial Mis-Selling

1. Payment Protection Insurance

If you have ever made a purchase on credit or taken out a loan, it’s a good idea to check whether payment protection insurance (PPI) was added without your knowledge. 

While not all PPI policies were mis-sold, you could be a victim of financial mis-selling if PPI was added without your consent or if it wasn’t clearly explained that you were purchasing PPI when you had no desire for it.

Additional signs include being told PPI was mandatory, being sold PPI while unemployed or retired, or if no one checked whether you already had insurance that could cover the loan.

Whilst generally, the deadline to bring a complaint in respect of PPI mis-selling passed on 29 August 2019, you may still be able to bring a legal claim, subject to arguments of limitation and the lender of the Financial Ombudsman Service (FOS) may still investigate the complaint if there is an exceptional reason to explain your delay.

2. Accident, Sickness and Employment Insurance

Accident, sickness and employment policies are designed to provide financial support for those unable to work due to personal injury or illness. However, mis-selling can occur if these policies were sold without fully understanding your health or employment status.

For example, if you were sold such a policy when it was unsuitable due to pre-existing medical conditions, or a lack of coverage for your specific job type, it could be a case of mis-selling. 

Another example is if ASEs were sold as essential despite the customer having sufficient coverage from other sources. If you already had health insurance or income protection through your employer, the ASE policy may have been redundant, meaning it was not necessary. 

3. Personal Loan Protection

Loan protection insurance intends to aid recipients of insurance coverage by offering financial assistance during difficult times, such as job loss or disability.  

Loan protection differs from PPI in that it can cover a range of debts, such as credit cards and personal loans, whereas PPI is typically tied to a single debt.

If you were not informed that you could opt out, or if the loan protection policy was presented as compulsory, you may have been mis-sold the product. Other signs of mis-selling include not being informed about the policy’s exclusions, which could result in you lacking the coverage you were led to believe you had.

Steps To Take If You’ve Been A Victim Of Financial Mis-Selling

If you believe you have been a victim of financial mis-selling, it is important to act quickly. Begin by gathering all relevant documentation, especially written evidence, and file a claim or complaint as soon as possible. 

Contact the financial services company by using their formal internal complaints process, which they are obligated to respond to. 

If their response is inadequate, you have the option to escalate the matter to the Financial Ombudsman Service or pursue compensation through the courts, depending on the circumstances.

Complaint To The Financial Ombudsman Service

The FOS is an independent body that provides a free service to resolve disputes between firms authorised by the Financial Conduct Authority (FCA). 

The FOS has the authority to order compensation of up to £415,000 for cases involving firms’ actions after the 1st of April, 2019, and up to £190,000 for actions before this date.

Be mindful of strict time limits for filing complaints. You must submit a complaint within 6 years of the event in question or 3 years from when you became aware of the issue, whichever is later. 

Complaints must be made within 6 months of receiving a final response from the provider. If you have not received a response within 8 weeks, you can escalate the issue to the FOS. 

Court Proceedings

Court action may be necessary if there is a valid complaint and the potential compensation exceeds the £415,000 limit set by the Financial Ombudsman Service. 

Legal costs for both parties can accumulate quickly, so it is important to seek legal advice early on to understand the best course of action, as well as the potential costs involved. 

Court claims are also subject to strict deadlines. Generally, your claim must be filed within 6 years of the incident or 3 years from when you became aware of the issue, whichever is later. 

How We Can Help

If you believe you have been a victim of financial mis-selling, we strongly advise seeking legal advice to evaluate your case and its success potential. 

At Harding Evans, our financial mis-selling solicitors can provide clear, tailored advice on your case. We can guide you through the complaint process with the Financial Ombudsman Service or pursue other legal options, ensuring your rights are protected.

Contact us today to find out more.