The scheme will compensate some 2,000 customers who hold more than £1m with the firm.

It will automatically send payments to the credit union’s members based on the union’s membership records, with savers with less than a £1000 receiving a letter to get cash over the counter and anyone else receiving a cheque.

The scheme hopes to compensate the vast majority of savers within seven days, as is standard FSCS procedure.

FSCS operations director Kate Bartlett said: “FSCS is protecting CommuniSave Credit Union members. We’re here for you and we’re ready to help.

“Your savings are safe and we will get them back to you within the next week. And the process is automatic so you won’t have to apply for our protection. FSCS guarantees up to £85,000. That will protect every member of the credit union.”

The FSCS, which has been set up to protect customers from losing their money when a financial services firm goes bust, is funded by a levy on financial services firms.

The FSCS levy is made up of management expenses – the expense of running the service – and compensation costs.

Earlier this month the scheme announced it would change the way it calculates fees based on the average of the proceeding three years’ expected compensation costs – or one year’s, whichever is the greater.