Investors compensation battle

NIC CICUTTI

Thousands of elderly investors face being sucked into a bruising battle between some of Britain's top Building Societies and a nationwide compensation scheme.

At stake are millions of pounds which investors would cose if they fail to join the fight over alleged bad investment advice.

The Investors Compensation Scheme, the safety net for victims of fraud and poor advice is taking the buiolding societies to court claiming back money it has has already paid out to thousands who were victims of the home income plan scandal.

But it has now been forced to add the names of scores of investors to a writ against Cheltenham & Gloucester, the former building society now owned by Lloyds Bank.

Failure to do so would tie up the ICS in a separate legal battle with C&G over whether the compensation body has the right to act on behalf of the victims.

The C&G argues that the original assigment letters signed by the savers are legally questionable. It has forced a court hearing, set for October, on whether they can be accepted.

A C&G spokeswoman said: "We believe that they have bungled the legal forms they have asked people to sign. We assume that the wording on this form is widespread and went beyond just the C&G. It is unlikely that we are the only lender affected."

More than pounds 30m already paid out by the ICS to thousands of home income plan victims.

They lost out in the late 1980s after using money they borrowed from building societies to invest in bonds designed to give them an income and pay off their mortgage. But the schemes collapsed, leaving many savers thousands of pounds in debt.

By taking action against the societies, including Bristol & West and Newcastle, that lent the money to the victims, the ICS is hoping to claw back some of what it has paid.

But its legal claim against the societies has faced a vigorous defence from the societies, especially the C&G, which has been targeted by the ICS.

An ICS spokesman said: "What we are doing is adopting a belt and braces approach to this case. There will be an extensive legal consultation over the assignment terms, but we do not want to see claims in this case ruled by the courts as being outside the six-year time limit." He added that if the October hearing on this issue were to be lost, the ICS may have to ask all home income savers to join in future action against building societies.