Member Article

Insolvency expert welcomes great consumer protection proposals

PROPOSALS for greater legal safeguards to protect consumers have been welcomed by one of South Yorkshire’s leading debt experts.

The Law Commission is currently looking at ways in which customers can see their rights enhanced in the wake of the continuing upheaval on the high street, which has seen several leading brands disappear.

In particular, they are advocating greater safeguards for customers who have paid a cash deposit of £250 or more for services that have then not been delivered because the company has gone bust.

“Money paid out in advance for anything from a new sofa to a wedding reception can currently be lost if the company goes under,” said Adrian Graham, of Sheffield insolvency practice Graywoods.

“What the Law Commission is now recommending is that consumers paying a cash deposit of £250 or more within six months of a retailer going into administration should be moved up the creditors’ priority list.

“Such a move has to be a good thing because at the moment it is too often the smaller, more vulnerable creditors who miss out and if this is a major purchase or a special celebration that you’ve been saving long and hard for, that can be a really tough blow.

“This is still very much an idea at the consultation stage but it is at least recognising that there should be strengthening of consumer protection in certain scenarios.”

Adrian added that the suggested legislation would be particularly effective in the case of companies like Christmas savings clubs Farepak, which went bust in 2006 owing £37 million to an estimated 100,000 savers with no obligation to ring-fence the cash handed over by customers for the purpose of buying their pre-ordered goods.

In addition, the commission is also recommending that banks should do more to tell customers about existing protections for card transactions.

“Never forget that under the chargeback scheme, you can get your money back from the bank if you buy something using a credit or debit card and the company goes bust or simply fails to deliver,” said Adrian.

“If more people knew how this scheme works and used their credit and debit cards wisely they would instantly be much better protected.”

This was posted in Bdaily's Members' News section by John Highfield .