What happens if I owe money to a bank, building society or credit union that fails?

Amounts owed to the failed firm (for example, loans, mortgage or credit card debts) are taken into account before any compensation is paid. If you are a borrower with the same firm this may affect the amount you can claim, as the amount of your deposits may be 'set-off' against any amounts you owe. If a firm were to fail, FSCS would consider a depositor's overall net claim, which would include taking into account any amount owed which the firm may set off. In the event that set off is applied, and if the borrowings exceeded the depositor's savings, there would be no overall claim against the failed firm, and the depositor would not be entitled to any compensation. For example, if a depositor had a mortgage of £200,000 and savings of £150,000 with the same bank, set off may be applied by the Insolvency Practitioner dealing with the bank failure. As a result, the depositor may end up owing the bank £50,000, so there would be no positive balance and no claim for compensation.