Protecting consumers when retailers go under

Money paid out in advance for items from sofas to mobile phones and services such as football season tickets and even weddings can be lost if the company you are buying from goes under – especially if you have paid by cash or cheque. In a report published today we recommend that consumers paying a cash deposit of £250 or over within six months of a retailer going bust should be moved up the priority list when it comes to getting their money back.

“Getting a refund on your deposit depends very much on how you paid, and on commercial decisions made by the accountants dealing with the bankrupt business,” said Stephen Lewis, Law Commissioner for commercial and common law. “It can be a hit-and-miss affair, and it’s often the most vulnerable consumers who lose out. We believe that consumers should have better protection in the more serious cases where larger sums are involved.”

As well as protections for larger cash deposits, we also recommend that banks should do more to tell their customers about existing protections for card transactions. “Banks must make it clear to customers what protections are being offered and how to make a claim under the ‘chargeback’ scheme. Consumers should be encouraged to use credit and debit cards whenever they can and to contact their bank quickly if things go wrong.”

Our report also considers Christmas clubs and other “savings schemes” that deliver goods or services at the end of the savings period rather than returning your money with interest, and we recommend that schemes marketed as being suitable for savings must make sure their savers’ funds are protected.