The Financial Services Compensation Scheme is to recover £28m from Norwich and Peterborough Building Society after finalising a deal to recover the money paid to N&P Keydata customers.
The arrangement will see ex gratia payments made directly to N&P customers who invested in Keydata life settlement products.
N&P announced in March it had set aside £57m to repay customers who invested in Keydata products through the society.
Earlier this week the FSA fined N&P £1.4m over its failings to ensure advice to invest in Keydata products was suitable, and announced that out of the £57m set aside by N&P a total of £51m would be paid in compensation.
The £28m to be recouped by the FSCS will come out of the £51m total compensation.
N&P will calculate the payments in line with the Financial Ombudsman Service approach in determining Keydata complaints, but the £100,000 cap that usually applies to FOS complaints will not apply.
Customers who have already been compensated by the FSCS and assigned all their rights to the FSCS will receive an ex gratia payment from N&P.
The payment from the FSCS and the ex gratia payment from N&P will total the amount N&P customers would otherwise have been eligible to apply for. Customers who have not been compensated by the FSCS will be invited by N&P to apply for an ex gratia payment. N&P will contact its customers shortly with more information.
FSCS chief executive Mark Neale says: “This is a positive development for both consumers and our levy payers. It is likely that N&P customers will receive a higher amount overall than they would otherwise have received from the FSCS. At the same time, our levy payers will benefit as a consequence of this significant recovery.
“We pursue recoveries against third parties whenever it is reasonably possible and cost effective for us to do so. We intend to pursue further recoveries in respect of our compensation costs in relation to Keydata in the future.”