Our Recoveries Policy
COMP RULES
Under COMP 7.2.3(2)R: "If the FSCS takes assignment of rights from the claimant... it must pursue all and only such recoveries as it considers are likely to be both reasonably possible and cost effective to pursue".
FSCS's Recoveries Policy
The approach to recoveries varies between sub-schemes, and is determined in the light of recovery opportunities on a case-by-case basis. In general, claims are always pursued with insolvency practitioners ("IPs") such as liquidators or administrators where there is a prospect of dividends to creditors.
Usually, FSCS ranks as an unsecured, ordinary creditor, although there may be exceptions - in some investment firm failures, FSCS may be able to assert a trust claim, for example in respect of client money/assets, and (from April 2003) direct policyholders (including FSCS) have a priority status within the class of unsecured creditors of insurers.
The policy towards recoveries is described in more detail for each of deposits, insurance and investment sub-schemes. Please click on the relevant link below. The mortgage broker and general insurance sub-schemes are likely to be most similar to the investment sub-scheme (although FSCS has no recovery experience so far in these two sub-schemes).
Although claims in the estates of failed companies are generally cost effective to pursue, FSCS applies a risk/reward analysis to recoveries, in particular third parties claims. Where appropriate, FSCS will compromise or abandon recovery claims if the likely costs are not justified by the merits of the claim and the potential recovery.
Assignment of rights
The ability to make recoveries is dependent upon claimants assigning rights against the firms in default and third parties. FSCS then "stands in the shoes" of the claimant. An assignment of rights is required by FSCS in most cases. However, if FSCS decides not to pursue any recovery, at the claimant's request it reassigns the claim to the claimant.
Recovery claims are not pursued as a "deterrent" to any market practice or as quasi enforcement action.
