Glossary term
Customer Redress
Subject: Compliance and Regulation, Conduct and Consumer Protection
Also known as: Restitution, Customer Compensation
Customer redress is the remedy a firm gives to customers it has wronged, usually refunds with interest, compensation or correction of the product, often together with an apology or explanation.
Explanation
Redress follows a finding of customer detriment, whether the firm spots it itself, a customer complains, an ombudsman rules or a regulator orders it. The usual steps are to identify who was affected, work out the loss, pay it and tell customers what happened. Amounts often include interest and sometimes a payment for distress or inconvenience. Large exercises, called past business reviews or lookbacks, can cover thousands of accounts over many years. Some run under regulator supervision, and some are paid through industry-funded schemes when a firm fails. Good practice is to pay proactively instead of waiting for claims, since many customers never complain. Redress does not wipe out the risk of a fine, but prompt and full payment usually counts in the firm's favour with the regulator.
Example
An insurer sold add-on cover that many customers could never use. After a regulator review, it identifies 50,000 affected policies, calculates premiums paid plus interest, and sends payments automatically with a plain letter of explanation. Customers who disagree with the amount can ask for a review, and a second line team checks a sample of payments for accuracy before the exercise is closed.
Not to be confused with
- Penalty
- A penalty is paid to the state to punish the firm; redress is paid to customers to put right their loss.