One bank for loans and savings? Read FSCS small print

by Gill Montia

Story link: One bank for loans and savings? Read FSCS small print

Savers who have carefully placed their money with different providers to take advantage of the Financial Services Compensation Scheme’s (FSCS) guarantee of £35,000 per individual, should take a look at FSCS small print.

According to a report in The Guardian, they may not receive full compensation in the event of the collapse of a bank or building society, if they have an outstanding loan with the company.

Under the terms of the FSCS, the sum of a customer’s debt with a financial institution can be taken away from their savings with the same provider, to produce a net claim.

Therefore, if a claimant’s debt with a bank exceeds their savings, there could be no overall claim and no compensation.

The situation is more complicated where, for example, a mortgage is held with one part of a banking group and savings with another.

Consumers should also be wary about savings held within a financial group, even when there is no issue of debt.

The compensation scheme covers companies according to their listing with the Financial Services Authority (FSA).

If a group has only one FSA listing, savings held under different brands may only qualify for £35,000 compensation in total.