Proposals for consumer protections when companies collapse
The government is to consider new laws to protect consumers who have prepaid for products when a business becomes insolvent.
• Government to consider new laws to protect consumers who have prepaid for products when a business becomes insolvent
• proposed measures will include guaranteeing consumer schemes like Christmas savings clubs can safeguard customers’ money
• reforms are part of the government’s modern Industrial Strategy to ensure markets work in the interests of consumers
New laws to protect consumers who have already paid for products but not received them when businesses go bust will be considered by the government, it was announced Thursday 27 December 2018.
Business Secretary Greg Clark confirmed that during 2019 the government will consult on laws requiring consumer prepayments to be protected in particular sectors. This would further strengthen the government’s ability to respond quickly to problems involving consumers who have prepaid for goods or services before a firm becomes insolvent. Common forms of prepayment include internet orders, the purchase of gift vouchers and money saved in payment schemes marketed as forms of saving like Christmas savings clubs.
If a business running a savings club becomes insolvent, consumers’ money is not protected unlike when it is saved in a UK-regulated bank account. New laws proposed today would see this money safeguarded, with legislation requiring businesses to adopt measures to protect customers against losses - whether that is through trusts, insurance or other mechanisms.
If enacted this announcement by the Department for Business will help to protect consumers who have laid out funds and are waiting for delivery of the relevant goods or services. As much of the concerns of Parliament are Brexit focussed at present it will remain to be seen if meaningful legislative change is completed this year.