Shoppers are to get protection when companies go bust under new proposals to safeguard those who pre-pay for products
- 120,000 savers lost £37million when the Farepak Christmas club failed in 2006
- Government is now set to bring in new protections for those who pre-pay
- It is hoped the laws will also help online shoppers whose suppliers go under
Shoppers who pre-pay for products before a company goes bust could get new protections under a new government policy.
Ministers are looking at binding new guarantees into law to help those who lose out when online firms or Christmas clubs go under.
Business Secretary Greg Clark said he hopes the new plans, to be unveiled in the New Year, will give shoppers peace of mind.
The gates of the Farepak were locked and around 120,000 savers lost out when the Christmas Club company collapsed in 2006. Ministers hope to offer new protections for customers
It comes after around 120,000 savers lost £37 million when the Farepak Christmas club failed in October 2006.
A Law Commission report in 2016 proposed new regulations to cover schemes of this kind, which it said ‘pose a particular risk to vulnerable consumers’.
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The Government is now set to consult on new laws requiring consumer pre-payments to be protected in particular sectors.
As well as Christmas savings clubs, the changes could cover internet orders which have not been delivered by the time a business fails as well as unspent gift vouchers.
Businesses could be required to adopt measures to protect customers against losses in the case that they become insolvent, whether through trusts, insurance or other mechanisms.
Many customer had saved hundreds of pounds towards their festivities when the company went under three months before Christmas 2006.
Mr Clark said: ‘When consumers pre-pay for items through savings clubs it is reasonable to expect that if something goes wrong, their money should have some degree of protection.
‘The measures we are consulting on will give shoppers greater peace of mind.
‘It’s all part of how we’re helping make markets fairer for all, especially the most vulnerable, as part of our modern industrial strategy – with more to come next year through our comprehensive Consumer White Paper.’
The measures include a commitment from the Government to work with consumer groups and businesses to clarify the law so that it is clearer at what point a consumer legally owns a product.
This action is designed to address cases where a consumer has paid for goods which are still in a retailer’s possession when the business goes into administration or becomes insolvent.
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