Recoveries Update

The last edition of Outlook noted that FSCS’s loan with HM Treasury in respect of Bradford & Bingley could be paid off as a result of loan sales by UK Asset Resolution. On 23 May 2018, loan sales completed and, as a result, the FSCS loan balance of £4.7bn was repaid in full.

On 1 October 2018, FSCS made the final payment for interest accrued up to and including 23 May 2018. As a result, FSCS has no outstanding liabilities to HM Treasury for the failures of 2008/9.

The Legal & Recoveries Team continues to place additional focus and resource on pursuing cross-jurisdictional recoveries, where the underlying investment has failed. This work often arises in the context of pensions mis-selling by an Independent Financial Advisor which is now in failure for FSCS’s purposes.

A current example of this recovery work relates to the Harlequin property investments, located in jurisdictions across the Caribbean, where FSCS has paid more than £100m in compensation. As a result of this focus, FSCS is working more closely than ever with other UK agencies, such as the Serious Fraud Office and the FCA, to maximise recoveries

Payment Protection Insurance

Since 2009 FSCS has paid more than £200m in compensation to consumers in respect of Payment Protection Insurance (PPI) mis-selling. In accordance with FSCS’s statutory obligation to pursue recovery actions where cost effective and reasonable to do so, FSCS has been pursuing a PPI recoveries project against PPI lenders since Autumn 2015.

This recoveries action followed the Supreme Court’s decision in 2014 in the case of Plevin v Paragon Personal Finance Ltd, which allowed consumers to bring a claim under the Consumer Credit Act 1974 against lenders for undisclosed commissions in respect of their PPI that were so large that the relationship could not be regarded as fair.

In reliance on the Plevin case, FSCS has pursued lenders whose credit agreements were the subject of PPI policies that FSCS had determined were mis-sold by brokers to consumers – and whom FSCS subsequently compensated. FSCS’s position is that the non-disclosure of the commission paid by the consumer in respect of their PPI gave rise to an unfair relationship between the consumer and the lender for the purposes of the Consumer Credit Act.

FSCS’s PPI recoveries project has now come to a successful resolution with a total recovery of almost £20m. This recovery will be used to offset the costs falling on insurance intermediaries.