5 steps to getting your money back when a financial firm goes bust

It can be extremely stressful if a company you use goes under. Whether they are holding money of yours or owing you cash, there’s the worry about how long it will take to sort out and whether you will get your money back at all.

But the good news is that many customers of financial services firms still have a last resort – the Financial Services Compensation Scheme (FSCS).

As long as a company is FCA registered and the products they offer are FSCS protected then its customers have somewhere to claim compensation. It has already paid out £372m in 2018 alone and more than £26bn since it began in 2001.

Set up by the Government, FSCS is impartial and independent. It provides a free service to help those people who find that their financial provider has failed. While they cover a huge range of financial products, that each have a compensation limit, you should be aware that they do not cover everything – like payday loans, Christmas Clubs or peer to peer lenders.

How do I know if a company is protected?

There’s a useful guide to that helps you find out if you’re protected available on the FSCS website. If a company is regulated by the Financial Conduct Authority (FCA) then it’s usually also protected by FSCS. You can see which firms are FCA regulated via its register.

Not all financial firms and products are covered FSCS, so you should check they are FSCS protected too. You should also be able to see the FSCS logo on the website or company documents.

However, you only have the FSCS backup if the firm is carrying out the services it’s authorised to do. If it’s not authorised to hold deposits, but it is, then you will not have the FSCS protection you otherwise would.

What can you expect from the FSCS if you think you have a claim?

The good news is that for most people who have a straightforward claim the process is straightforward. If a bank, building society or credit union goes bust, for example, the compensation is completely automatic. You don’t need to make a claim and you’ll get your money back within seven days in most cases.

But not every claim is quite that simple and for insurance or mis-selling claims, you are likely to need to apply for compensation.

How much does the FSCS guarantee?

You can see exactly what the FSCS covers here, but as a brief guide your deposits in banks, building societies and credit unions are protected up to £85,000 per person, per authorised bank. That number doubles if it is a joint account.

Claims relating to authorised firms offering debt management, endowments and mortgage advice are capped at £50,000. For insurers it’s up to 100% of the policy, depending on the situation, and for pension deposits it’s up to £85,000 per person per firm.

Do I need to go through a claims company?

No, you really, really don’t. Companies that offer to manage your claim on your behalf do exist, but you don’t need to use an intermediary. You still need to get your paperwork together and provide them with the information and you have to pay them a commission. If you go direct to FSCS, it’s free. No brainer.

Also, by claiming directly via the FSCS you can log in to see the status of your claim, you can chat online, by email or phone to experienced staff and if you have to stop at any time then you can save your application and return to it later.

What happens if I am not protected by the FSCS?

The FSCS only steps in to protect consumers if the original financial services firm they dealt with has gone under.

If the company you have a complaint against is still in business then you should claim anything you’re entitled to directly from them. If you are still not satisfied, you can then make a claim to the Financial Ombudsman, which is free and will help sort issues with banks, insurance, PPI, loans, mortgages, pensions and any other financial complaints.

You should also remember that the FSCS only covers lost deposits and mis-selling or bad advice claims, where a company has been negligent or misled customers. You can’t seek payment just because your investments have performed badly, for example.

It may be increasingly popular but peer-to-peer lending is also not protected by the scheme.

The lesson to learn is that you shouldn’t sign on the dotted line unless you know the risks – and checking your provider is authorised and the products are covered by FSCS protection should be on your list of questions.

Okay, how do I make a claim?

As explained, where a bank, building society or credit union has failed, you don’t need to do anything. FSCS will automatically compensate you up to £85,000 per person (£170,00 for joint account holders). It’s free, and you’ll get your money back within seven days in most cases.

But if you have a claim against a financial services firm that has gone bust then here are the 5 straightforward steps to getting your money:

1. Check you’re covered.

A good place to start is the FSCS homepage, which has quick links to all the information you might need, including where to make a claim and which financial products have FSCS protection.

2. Check the firm is in default

FSCS only steps in when a covered financial services company is no longer trading. If it is still trading then you should contact the company directly.

Check the FSCS list of companies in default to make sure.

3. Get your supporting documents ready

If FSCS has to investigate your claim then it will need relevant supporting documents, including two forms of ID, documents relating to the product and advice you received and your bank account details.

Get these ready in advance so you can just sail through the claims process.

4. Create an online account

This is really simple and it allows you to submit a claim and then check on its progress. Best of all, you can save your application and come back to it, so if you can’t do it all in one go you won’t have to keep restarting.

5. Submit your application

Once you’ve answered the questions, uploaded your supporting documents and electronically signed your claim, you can submit it.

It shouldn’t take more than 1-2 hours to do so, and you can contact the FSCS for help both online and by phone if you need extra support.

There’s a lot of stress when a financial firm that you have used goes