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COMP 11.1 Application and Purpose


COMP 11.1.1 R

This chapter applies to the FSCS.

COMP 11.1.2 G

It is also relevant to claimants.


COMP 11.1.3 G

The FSCS will usually pay compensation direct to the claimant, but in certain circumstances it may be appropriate for the FSCS to pay compensation to someone other than the claimant, or to make reduced or interim payments. The purpose of this chapter is to set out when those circumstances arise.

COMP 11.2 Payment

To whom must payment be made?

COMP 11.2.1 R

If the FSCS determines that compensation is payable (or any recovery or other amount is payable by the FSCS to the claimant),2 it must pay it to the claimant, or as directed by the claimant, unless:

  1. (1)

    arrangements have or are being made to secure continuity of insurance under COMP 3.3.1 R to COMP 3.3.2E R or the FSCS is taking measures it considers appropriate to safeguard eligible claimants under COMP 3.3.3 R to COMP 3.3.6 R; or

  2. (2)

    COMP 11.2.2 R or COMP 11.2.3 R applies.1

COMP 11.2.2 R

Where a claimant has a protected claim arising out of the circumstances described in COMP 12.4.5 R, the FSCS must pay any compensation (and any recovery or other amount payable by the FSCS to the claimant) 2to:

  1. (1)

    the trustee of an occupational pension scheme; or

  2. (2)

    a personal pension scheme or other product provider; or

  3. (3)

    both (1) and (2);

and not to the claimant, unless exceptional circumstances apply.

Form and method of paying compensation

COMP 11.2.3A R

4The FSCS may pay compensation in any form and by any method (or any combination of them) that it determines is appropriate including, without limitation:

  1. (1)

    by paying the compensation (on such terms as the FSCS considers appropriate) to an authorised person with permission to accept deposits which agrees to become liable to the claimant in a like sum;

  2. (2)

    by paying compensation directly into an existing deposit account of (or for the benefit of) the claimant, or as otherwise identified by (or on behalf of) the claimant, with an authorised person (but before doing so the FSCS must take such steps as it considers appropriate to verify the existence of such an account and to give notice to the claimant of its intention to exercise this power);

  3. (3)

    (where two or more persons have a joint beneficial claim) by accepting communications from and/or paying compensation to any one of those persons where this is in accordance with the terms and conditions for communications and withdrawals of the protected deposit; and/or

  4. (4)

    4by paying compensation to a firm, which makes a claim on behalf of its clients, if the FSCS is satisfied that:

    1. (a)

      the business of a relevant personin default has been transferred to the firm;

    2. (b)

      each client has a claim against the relevant personin default arising out of a shortfall in client money held by the relevant personin default;

    3. (c)

      the clients in respect of which compensation is to be paid satisfy the conditions set out in COMP 3.2.2 R (1); and

    4. (d)

      the firm has agreed, on such terms as the FSCS thinks fit, to pay, or credit the accounts of, without deduction, each client, that part of the compensation due to him.

Reduced or interim payments

COMP 11.2.4 R

If the FSCS is satisfied that in principle compensation is payable in connection with any protected claim, but considers that immediate payment in full would not be prudent because of uncertainty as to the amount of the claimant's overall claim3, it may decide to pay an appropriate lesser sum in final settlement, or to make payment on account.1

COMP 11.2.5 R

The FSCS may also decide to make a payment on account or to pay a lesser sum in final settlement if the claimant has any reasonable prospect for recovery in respect of the claim from any third party or by applying for compensation to any other person.

COMP 11.2.6 R

The FSCS may not pay a lesser sum in final settlement under COMP 11.2.4 R and COMP 11.2.5 R where the claim is a DGD claim or ICD claim.

COMP 11.2.6A G

1 COMP 11.2.4 R applies to compensation payable in connection with any protected claim. It would, for example, apply to the situation where the FSCS considers it imprudent to make a payment in full because of uncertainty as to the value a court might attribute to a bonus provided for under a long-term insurance contract. In such circumstances the FSCS may make payment of compensation on account to the policyholder in respect of benefits under the contract the value of which is not uncertain.

Paying interest on compensation

COMP 11.2.7 R

The FSCS may pay interest on the compensation sum in such circumstances as it considers appropriate.

COMP 11.2.8 R

Interest under COMP 11.2.7 R is not to be taken into account when applying the limits on the compensation sum payable in respect of a claim under COMP 10.

Paying full compensation in return for rights

COMP 11.2.9 R

4Where the FSCS considers that the conditions in COMP 11.2.4R are satisfied but, in relation to a class of claim, in order to provide fair compensation for the generality of such claims it would be appropriate to take the approach in (1) and (2) rather than pay an appropriate lesser sum in final settlement or make a payment on account, it may for that class of claim:

  1. (1)

    receive whether by assignment, transfer or operation of law the whole or any part of a claimant's rights against the relevant person, or against any third party, or both on such terms as the FSCS thinks fit; and

  2. (2)

    disregard the value of the rights so received in determining the claimant's overall claim.

COMP 11.2.10 G

4Factors that the FSCS may take into account when considering taking the approach in COMP 11.2.9R (1) and COMP 11.2.9R (2) include whether the amount of claimants' overall claims are likely to be assessed within a reasonable time frame, the circumstances of the claimants, the circumstances of the claims and the nature of the products to which the claims relate.