The FSCS has assessed that MPL is unable to pay claims against it, meaning they will fall on the scheme.
The majority of claims are for mortgage endowments although there are a few pure mortgage claims. The FSCS says it is too early to estimate the total size of payouts.
Millfield’s shares were suspended in June 2006 and the FSA issued a final notice and cancelled permissions in August after assessing it had failed to provide a viable proposal to rectify its £4.5m deficit.
The Money Portal bought the businesses of MPL and Sage Financial Services for £10.6m, with MPL advisers rebranded as Bates Millfield and Sage retaining its branding.
Millfield’s last set of results showed it had lost £54.12m since it floated in 2001, equivalent to nearly £1m a month.
FSCS spokeswoman Suzette Browne says: “We have declared MPL in default after assessing that it was unable to pay the claims against it. We currently have around 150 claims but this could rise now that a declaration of default has been made.”
MPL administrators PricewaterhouseCoopers says the move does not affect the administration process.