Consumers set to Jump the Queue on Insolvency?

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Law Commission has recently delivered a new report to the government, reviewing the protections in place for those who pay out in advance for goods and services when the company they are buying from goes bust.

A prime example of this in the past was the folding of Christmas “savings club” Farepak in 2006. Farepak owed out £37 million to an estimated 100,000 consumers, who were without any official regulations or guarantees in place to help ensure they received their money back.

Stephen Lewis described the possibility of getting this kind of deposit refunded as currently being “hit-and-miss”; highlighting that it is often the most vulnerable of consumers who are left at the back of the queue, behind suppliers and other creditors.

The report recommended to Parliament that greater protections are provided for those paying cash deposits of £250 and above within six months of a retailer going under, suggesting they should now be refunded as a priority before other parties.

The Law Commission has also advised that banks do more to inform their customers about the existing schemes for when purchases are paid by credit or debit card and goods are not delivered. They advise consumers use credit or debit cards as much as possible to be protected by the “chargeback” scheme already in place. The government has not yet responded to the report, but change to the law could soon be on the horizon and worth keeping an eye out for.

For more information on how this could apply to you or your business, or for advice on trading law in general contact John Pickervance, Associate Solicitor within the Corporate and Restructuring department by email john.pickervance@forbessolicitors.co.uk or phone 0800 321 3258. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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