How to claim compensation if a firm fails

If you are owed money by a financial firm that goes bust, you may be entitled to compensation.

It is important to know how your money is protected and how much compensation you could claim if a UK financial services firm goes bust.
 
Follow these 7 steps to see how to claim compensation.

Step 1: Contact the firm directly

Try to contact the firm to see if it can pay money it owes.

If an authorised firm will not pay you money it owes, the Financial Ombudsman Service may be able to help. You can find out more about how to complain.

Step 2: Check if the firm is still trading

You may be able to find out if a firm is still trading by calling or writing to it, or checking its website. You could also get this information from Companies House.

If a firm has stopped trading you should still try to contact it as soon as possible to set out your claim, as the Financial Services Compensation Scheme (FSCS) will not pay compensation when a firm has enough assets or means to pay claims made against it.

Step 3: Contact the Financial Services Compensation Scheme

The Financial Services Compensation Scheme (FSCS) can cover eligible individuals (and some businesses) that are, or were, customers of an authorised financial services firm that has been declared ‘in default’.

If it considers a firm authorised by us to be ‘in default’ – which means it is unable, or likely to be unable, to pay claims against it – the FSCS will try to contact all customers of the firm to provide a compensation application form.

However, if you do not receive an application form you should contact the FSCS to make a claim for compensation.

Step 4: Make a claim yourself

There are many companies that offer to complain or claim compensation on your behalf, usually known as claim handlers, claims firms or claims management companies (CMCs). More information for those using, or considering using, the services of a CMC.

But making a claim for compensation to the FSCS is a free, simple process you can do yourself.

You can get free help from the FSCS if you need it.

Step 5: Know your limits

There are limits to the amount of compensation the FSCS can pay depending on what type of product you are claiming for.

These limits apply to each person, per authorised firm and product category (as below).

Compensation is only paid to cover financial loss, so for investment claims the compensation paid will try to return you to the financial position you would have been if you did not invest.

 

Product Compensation limit How it works
Deposits

£75,000 per depositor.

Depositors with some types of temporary high balances will have FSCS protection up to £1m for up to 6 months.

This includes deposits in a bank, building society or credit union.
Investments £50,000 This applies to investments placed in firms declared in default from 1 January 2010.
Home finance £50,000 This includes advising on and arranging mortgages, and applies to home finance firms declared in default from 1 January 2010.
Insurance 90% of the claim with no upper limit. This limit is for insurance business, and general insurance advice and arranging. Compulsory insurance is protected in full.

 

If you have more money with a firm than the FSCS limit covers, you may receive a further payment, or payments, to pay your share of any money the firm is found to have.

However, this will not necessarily cover all of your loss and will depend on how much money was left in the firm when it failed and how that money is allocated.

Step 6: See why a firm is not ‘in default’

If you think a firm authorised by us is in default’ but the FSCS has not declared that it is, contact the FSCS to find out whether it is investigating the firm.

Step 7: Find out what you owe

The FSCS will pay compensation regardless of any money you owe to a firm declared in default.

An exception to this is if your savings or current account is combined with your mortgage account, and operates as a single overdraft.

The depositor will still be responsible for the debt, such as a loan, mortgage or credit card debt.