FSCS or APP reimbursement: which covers a scam?

If a scammer tricks you into sending money by bank transfer, the scheme that gets most of it back is not the FSCS. It is the authorised push payment (APP) reimbursement rules, which require banks and payment firms to refund victims up to a maximum of £85,000¹. The Financial Services Compensation Scheme, by contrast, pays compensation when a financial firm fails and cannot pay what it owes².

The two are often confused because both involve a bank paying money back after something has gone wrong. They cover different events. The FSCS steps in when a firm is in default, meaning it cannot pay claims made against it or is likely to be unable to do so³. APP reimbursement steps in when you authorised a payment yourself but were deceived into making it.

There is one overlap worth knowing. If an authorised financial adviser gave you bad advice to invest in something that turned out to be a scam, and that adviser has since failed, the FSCS can pay compensation for the advice, up to £85,000⁴. That is a claim about the advice, not about the scam.

FSCS pays when a firm fails, not when you are scammed

The FSCS describes its own trigger plainly: it can pay you compensation if your financial services provider fails and cannot pay back your money itself². It was set up by parliament to pay back money to eligible people when their financial firm fails, and it is funded by the financial services industry⁶.

That definition matters because a scam is not a firm failure. If you send money to a fraudster posing as your builder, no financial firm has failed. Your money has gone, and the FSCS has no default to respond to. The FSCS says that in most situations it cannot compensate people for money lost due to scams or fraud⁹.

The exception it names is specific: where bad advice came from an authorised financial adviser to invest in something that turns out to be a scam⁹. In that case the claim is against the adviser's firm, and it only becomes an FSCS claim if that firm has failed. The FSCS can only pay compensation where there has been evidence that a regulated activity took place, meaning a customer actually received advice rather than simply being shown information¹⁰.

There is a second limit on this route. The FSCS covers a range of products when a UK-authorised firm fails, including deposits, insurance, investments, pensions and mortgage advice¹¹. It cannot protect occupational pension schemes if they fail⁴. And for investment claims, business conducted before 28 August 1988 is unlikely to be covered at all³.

APP reimbursement: your bank refunds most scam payments

The APP reimbursement rules apply to payments made within Faster Payments, and the regulator has extended the requirement to CHAPS payments too¹². They require banks and other payment service providers to reimburse you up to a maximum of £85,000 if you are the victim of an APP scam¹.

The policy was designed to be broad. The regulator said the level of the cap would mean 99.8% of all Faster Payments APP scams by volume, and 90% by value, are fully reimbursed¹⁴. In practice, the reimbursement rate reported for the first three months of the policy was 87%, revised up from an earlier figure of 86%⁷.

Two deductions and exclusions sit alongside the cap. Your bank may deduct an excess of up to £100 for each scam claim¹. And the reimbursement rules do not reach losses below that excess, above the £85,000 cap, or transactions outside their scope⁷.

The rules also build in protection for people who are more exposed. The regulator requires firms to provide additional protections for vulnerable customers¹⁵, and the guidance is explicit that if the rules apply and you were particularly vulnerable to the specific type of APP scam, your bank or payment service provider must reimburse you¹. The policy is intended to reimburse victims in all but exceptional cases¹⁷.

Which scheme covers which loss

The dividing line is what went wrong, not how much was lost.

The FSCS covers more than deposits. It covers insurance, investments, pensions and mortgage advice, and certain other regulated services, when a UK-authorised firm fails¹¹. Within insurance the rates vary: most types of general insurance are protected at 90% of the remaining policy premium, without an upper limit, while employers' liability claims are paid at 100%²¹. Credit insurance and marine insurance are not eligible for FSCS protection²³.

For mortgage advice, the FSCS can pay up to £85,000 per person per authorised firm, and only where the advice was given on or after 31 October 2004³. For insurance intermediaries, the cut-off is 14 January 2005³.

FSCS limits: £120,000 for deposits, £85,000 for investments and advice

The deposit limit rose to £120,000 on 1 December 2025⁵. It applies per eligible person, per authorised firm, and it covers money in banks, building societies and credit unions⁵. Joint accounts are covered up to £240,000²⁶.

The £85,000 figure that people remember from older coverage is now the limit for investment and pension advice, not for cash. The FSCS may be able to pay compensation up to £85,000 if an adviser has failed and gave bad pension advice⁴, and the same £85,000 limit applies to pension advice claims²⁷.

There is a higher temporary limit for money that is only briefly in an account. Certain qualifying temporary high balances up to £1.4 million are covered for six months, such as money from the sale of a house²⁶. The FSCS also describes temporary high balance cover as up to £1m for up to six months in its customer information²⁸. The two figures appear in different FSCS documents and are not reconciled there.

Where a scam can lead to an FSCS claim: bad advice from an authorised firm

This is the one place the two subjects genuinely meet. If an authorised adviser recommended an investment that turned out to be a scam, the loss is not reimbursed as a scam payment. It is claimed as bad advice.

The FSCS can pay compensation when authorised financial firms go out of business³⁰. For a claim to succeed, the adviser must have been authorised, the activity must have been a regulated activity, and the firm must have failed. The FSCS says it can only pay compensation where there has been evidence that a regulated activity took place, for example where a customer received advice to invest rather than simply being shown information about it¹⁰.

The same logic applies to products that are not themselves regulated. For peer-to-peer loans and unregulated collective investments, the FSCS is restricted to covering losses arising from bad advice, not the platform failing³¹. If the platform collapses but the advice was sound, there is no FSCS claim.

If the adviser is still trading, the FSCS is not the route at all. You can complain to the Financial Ombudsman Service⁴, which can award up to £455,000 plus interest for complaints referred on or after 1 April 2026 about poor advice from a still-operating authorised firm¹⁸. The FSCS handles claims where the adviser has failed³².

Where neither scheme applies: crypto, e-money and unauthorised firms

Some losses fall outside both schemes, and it is worth knowing which before assuming a refund is coming.

E-money firms and payment services firms are the clearest gap. The FSCS says it cannot protect you if an e-money firm or payment services firm fails¹⁹, and it cannot protect e-money or payment services firms at all¹⁹. Money held in those accounts is not deposit-protected in the way a bank account is.

Crypto is the second gap. Most cryptoassets are not FSCS protected because they are not regulated, including Bitcoin and Litecoin⁹. The FCA does not regulate most cryptoassets, so the FSCS cannot protect you if a platform that exchanges or holds them goes out of business²⁰.

Unauthorised firms are the third. If the firm was never authorised, there is no regulated activity for the FSCS to compensate, and the FCA register check that underpins most claims will not show it. The FSCS protection checker draws its results from the FCA's Financial Services Register¹⁹, so a firm that does not appear there is a warning in itself.

How to claim: your bank first, then FSCS if the firm has failed

The order depends entirely on what happened.

For a scam payment, the first step is your bank. The FSCS's own advice to someone who has been scammed is to speak to your bank, building society or credit union, which can protect and reimburse victims of certain types of fraud, and to report it to Action Fraud⁹. If the bank refuses or reduces the refund, complaints about how a payment firm assessed an APP scam claim can go to the Financial Ombudsman Service³⁴.

For a firm failure, the process is usually automatic. If your bank, building society or credit union has failed you do not need to make a claim, and the FSCS will return your money automatically up to its compensation limit⁶. Compensation is paid within seven working days of a bank, building society or credit union failing in standard cases, though more complex cases including temporary high balance claims take longer²⁵. For firms that failed after 1 April 2019, the FSCS compensates automatically³⁵.

For an insurance failure, the FSCS tries to get seamless cover with another insurer, and if that is not possible it looks to arrange the return of the remaining premium⁶. Where possible, policyholders are refunded the remaining portion of their policy premium, subject to the rules, or a replacement policy is arranged with another insurer³⁶.

If you do need to claim directly, the FSCS says claiming through it means you pay no fees and get 100% of the compensation⁶. If your claim is rejected, or until you accept compensation, you are free to pursue the firm or any third party yourself¹¹.

Fake FSCS contacts and recovery scams

Because the FSCS name carries weight, it is used by fraudsters. The FSCS has seen a rise in scams where telephone numbers are spoofed with fake caller ID to make it look as though the call is coming from the FSCS⁹. It has issued cease-and-desist letters to scammers who use its logo or fake its protection³⁷.

The FSCS lists seven signs that a contact is not genuine: being asked for money or payment details; the message arriving through an unusual channel such as WhatsApp; a phone number that is not on the website; an email that does not end in @fscs.org.uk; an unregulated firm such as a cryptoasset provider; compensation offered in a foreign currency or by a firm in another country; and American spellings or spelling errors⁹.

Recovery scams are a related problem. Fraudsters return to people they have already defrauded, asking them to pay money owed for a fake malware protection service or a new subscription fee³⁸. The pattern is the same as the original scam: a small payment demanded to unlock a larger one that never arrives.

If you suspect a fraud involving the FSCS, the FSCS asks you to report it through its contact page³⁹. For a scam payment, report to Action Fraud⁹. For advice on what to do next, MoneyHelper offers free guidance on choosing and using bank accounts⁴⁰, and the FSCS itself is a completely independent and free service⁴¹.