Where would you stand - if our bank collapsed!?

Under the Financial Services Compensation Scheme (FSCS) it is unlikely that a Solicitors practice will be held liable for losses resulting from a banking failure as long as they have placed clients money on deposit in accordance with the Solicitors’ Accounts Rules. However, any final decision on dispute would rest with the courts. The maximum that can be claimed by a client is £85,000.00. There is however, a £1million protection limit for certain types of temporary high balances (for up to six months), including sums held in property transactions. The protection only applies to individuals.

Proceeds resulting from the following life events are categorised as temporary high balances: Sums paid to solicitors in respect of:

  • Real estate transactions (property purchase, sale proceeds, equity release)
  • Benefits payable under an insurance policy
  • Personal injury compensation (unlimited amount)
  • Disability or incapacity (state benefits)
  • Claims for compensation for wrongful conviction
  • Claims for compensation for unfair dismissal
  • Redundancy (voluntary or compulsory)
  • Marriage or civil partnership
  • Divorce or dissolution of civil partnership
  • Benefits payable on retirement
  • Benefits payable on death
  • A claim for compensation in respects of a person’s death
  • Inheritance
  • Proceeds of a deceased’s estate held by their Personal Representative

Please be aware that some deposit-taking institutions (banks, building societies etc) have several brands i.e., where the same institution is trading under different names. You should check with your deposit-taking institution, the financial Conduct Authority (FCA) or a financial advisor for more information.

Peace Legal hold clients’ money in a solicitor’s clients call account with the Lloyds Banking Group. There is a FSCS limit which applies to each client and so if they hold other personal monies in the same deposit taking institution as the Lloyds Banking Group then their overall limit would remain at £85,000.00.

If we make a claim under the Financial Services Compensation Scheme (FSCS) on behalf of a client, we will give certain client information including full names and address details to the FSCS to help them identify the client and any amounts to which they would be entitled.

If we are to complete a transaction before we receive compensation, (and this will take up to 3 months) we may need to seek additional funds from the client according to the proportion of the total funds held in the failed deposit-taking institution.

Since the FSCS will not compensate a client who withholds their identity, we will assume we have our clients consent to give this information unless we are specifically informed by our client in writing not to do so. FSCS will still need to know our clients account balances but they will not pay compensation.

There is more information on the Financial Services Compensation Scheme website: www.fscs.org.uk.

Posted on Sep 21, 2021

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