Hundreds of victims of dodgy businesses are going broke while waiting for a new compensation scheme.

The banking royal commission called for measures to assist people who have won ombudsman decisions against insolvent businesses. Currently, many of these claims go unpaid because there is not enough money left over in the company.

The Federal Government pledged to set up a scheme to compensate victims of companies that have gone broke, but has now pushed the idea back until mid-next year.

The industry-funded scheme, known as a ‘compensation scheme of last resort’, was originally to be legislated by the end of this year.

But Treasurer Josh Frydenberg says the financial services industry needs time to recover from the COVID-19 economic crisis.

Meanwhile, about 620 people have made complaints against insolvent firms.

The Australian Financial Complaints Authority (AFCA) has stopped progressing these complaints until the scope and timing of the compensation scheme is made clear.

Additionally, more of AFCA's financial industry members have become insolvent, so there is an increasing amount of unfunded work on the ombudsman's operations.

The Department of Treasury has reportedly told liquidators that the scheme is not likely to begin until the end of 2021, with payments from the scheme are unlikely to commence until 2022.