The question a conduct supervisor asks after a complaint is what the firm knew about the customer when it sold the product, and whether its compliance file can show it. If the file cannot, the sale is hard to defend, whatever the seller meant.
What counts as misselling?
Misselling has two parts. The product may be wrong for the customer, such as insurance the buyer could never claim on. Or the product may be fine but sold on information that hides what matters: a fee, a risk, a commission paid to the seller.
Intent is not part of it. A seller who honestly misjudged a customer's needs has still missold. Intent is where financial fraud begins. Under section 2 of the Fraud Act 2006, fraud by false representation needs a seller who "dishonestly makes a false representation", aware the statement may be "untrue or misleading", to gain or to cause a loss. The same sale can therefore be a conduct failure, a fraud, or both, depending on what the seller knew.
The FCA writes "mis-selling"; the industry uses both spellings for the same thing.
What are the main types of misselling, and what are the consequences?
The first type is misrepresentation or nondisclosure. Motor finance is the current case. Lenders paid car dealers commission for arranging hire purchase, often undisclosed or only partly disclosed. On 1 August 2025 the UK Supreme Court rejected the customers' claims in tort and equity, but held that Mr Johnson was "entitled to succeed" under section 140A of the Consumer Credit Act 1974, because the credit relationship was unfair (press summary, [2025] UKSC 33).
The FCA then built an industry wide redress scheme for customers "treated unfairly between 2007 and 2024", which it expects to put "£7.5 billion back in people's pockets" (PS26/3).
The second type is unsuitability. Payment protection insurance is the reference case: customers were sold cover they did not need or could not use. The FCA set a complaints deadline of 29 August 2019, and by April 2021 refunds had passed £38.3 billion (FCA PPI page).
Which rules decide whether a sale was fair?
Table 1. Rules that judge a financial sale (as of October 2026).
| Rule | What it requires | Who enforces | Date |
|---|---|---|---|
| Consumer Duty (FCA PS22/9) | "Higher and clearer standards of consumer protection" for retail customers | FCA | 31 July 2023 for products on sale; 31 July 2024 for closed products |
| MiFID II , Article 25 (Directive 2014/65/EU) | Before advice or portfolio management, the client's knowledge, experience, finances and objectives, and only suitable recommendations | National supervisors in the EU | Directive of 15 May 2014 |
| Regulation Best Interest (84 FR 33318) | "The Broker-Dealer Standard of Conduct" for recommendations to retail customers | SEC | Effective 10 September 2019 |
| FINRA Rule 2111 (Suitability) | A "reasonable basis to believe" a recommendation is suitable, from the customer's investment profile | FINRA | Current rule |
| Consumer Credit Act 1974, section 140A | A court may find the credit relationship unfair | UK courts | Applied in [2025] UKSC 33, 1 August 2025 |
| Fraud Act 2006, section 2 | No dishonest false representation for gain or loss | Prosecutors and courts in England, Wales and Northern Ireland | Act of 2006 |
These are the consumer protection rules a sale is judged by: some test suitability, others disclosure. The line between misselling and fraud is intent, but redress does not wait for intent. In Johnson the Supreme Court rejected the bribery and fiduciary claims and still held the relationship unfair under section 140A, while the same sale made dishonestly, with a statement known to be false, for gain is fraud under section 2. The sales file decides which of the two a supervisor or a prosecutor can show.
That file is records work: who advised, what the customer said, which product and why.
How does redress protect consumers who were mis-sold?
A customer complains to the firm first, which in general must answer in writing within 8 weeks, and can then take the complaint to the Financial Ombudsman Service (FCA). Redress aims to put the customer "back in the position they'd have been in if things hadn't gone wrong" (Financial Ombudsman Service, updated 1 April 2026). For money paid out, that usually means a refund plus simple interest, typically from the date the loss arose to the date of payment.
Picture an add on insurance policy (illustrative) that cost £1,200, paid two years before the complaint is upheld:
- Refund of the premium: £1,200.
- Interest for a complaint referred to the ombudsman since 1 January 2026: the Bank of England base rate plus one percentage point. At an assumed average base rate of 4 percent, that is 5 percent simple, £60 a year, so £120.
- Total: £1,320.
The same complaint referred before 1 January 2026 took 8 percent simple interest: £192, a total of £1,392. The change cuts the interest part by £72 in this example.
How did misselling redress move in 2026?
- 1 January. The ombudsman's interest basis moved to base rate plus one point for newly referred complaints.
- 30 March. The FCA introduced the motor finance redress scheme (PS26/3), with implementation up to 30 June 2026 for loans from 1 April 2014 and 31 August 2026 for older ones.
- 1 May. The FCA said the scheme had been legally challenged.
- 2 July. The Upper Tribunal suspended parts of the scheme on terms agreed with the four challengers; firms must follow the rules that are not suspended.
Financial institutions that sell to retail customers can test their own exposure in three steps:
- Sample last quarter's sales of one product for the suitability and disclosure evidence on file.
- Read the commission wording customers see before they sign.
- Confirm that redress offered on complaints referred to the ombudsman since 1 January 2026 uses the new interest basis.
Related terms
- Financial fraud. Deception for financial gain; misselling becomes fraud when it is dishonest.
- Ponzi scheme. An investment fraud that pays earlier investors from new money.
- Regulation. The rules financial firms are supervised against, conduct rules included.
- Financial crime. Crime involving money or financial services.
- MiFID. The EU rules for investment services, suitability tests included.
- Market manipulation. Distorting prices or trading to mislead the market.
How this entry was checked. Two court and regulator records carry the cases: the UK Supreme Court's press summary of 1 August 2025 ([2025] UKSC 33) and the FCA's PS26/3 page, last updated 3 July 2026. The rules come from PS22/9, Article 25 of Directive 2014/65/EU, Regulation Best Interest (84 FR 33318), FINRA Rule 2111 and section 2 of the Fraud Act 2006; the PPI figures from the FCA's PPI page; the complaint route from the FCA's complaints page; the interest bases from the Financial Ombudsman Service's guidance of 1 April 2026. All were read on 29 October 2026, and the redress sum uses illustrative numbers. Onur Taner, Customer Success Manager at complead, drafted the entry, and Javid Khasayev, Senior Anti Fraud Specialist at GoldenPay, recalculates the redress example and rereads Table 1 before publication. Last reviewed: 30 October 2026.
