The retailers vanish. Will your money follow?

As shops and travel firms go bust, Chiara Cavaglieri looks at the rights of consumers who are left high and dry after paying upfront

The recession is cutting a swath through the high street. Every week, it seems, another familiar name disappears into the black hole of administration. With them go thousands of jobs and, for some unlucky consumers, the deposits for goods that they never get.

If a retailer goes into administration, customers who have paid in cash have little assurance that they will receive either the products or a full refund. A lucky few may find that their item is languishing in a warehouse with their name on it, so it is still worth contacting the receiver or insolvency practitioner and registering a claim in writing, with as many details as possible about the purchase. In reality, though, most consumers will lose out – and some quite substantially.

But for credit card-holders, the outlook is much brighter as under Section 75 of the Consumer Credit Act 1974, the card issuer is jointly liable for payments of between £100 and £30,000. This means consumers are entitled to a full refund for all spending on a card that falls within these limits, including any transactions carried out abroad.

Even better news is that shoppers do not need to have paid in full to be eligible for a refund. Even a deposit or small part-payment qualifies, provided the cost of the product is at least £100. "As long as you pay something towards the cost on a credit card, even as little as £1, you are still protected under the Consumer Credit Act," says Monica Jaimini, a legal adviser at consumer group Which?.

This kind of protection is extremely valuable at the moment, with more and more companies falling foul of the economic downturn. So consumers should always consider putting expensive purchases on a credit card, though taking care to pay off the balance before interest starts to accrue.

Where the Section 75 rule lets shoppers down, however, is when people pay for goods and services through a third party such as a travel agent. In such cases, the card issuer may not be considered equally liable as it does not have a direct relationship with the firm providing the goods or services.

The best way to avoid losing out when an airline or hotel goes bust is to book a package holiday protected by the Package Travel, Package Holidays and Package Tours Regulations 1992. These ensure that the tour operator is liable for problems at either of the suppliers, and the customer is therefore protected under a scheme known as the Air Travel Organiser's Licence. Atol-protected holidaymakers will wither receive a refund or a payment to get them home if a company goes bust in the middle of a holiday.

Airlines, however, are not covered by the Atol scheme, meaning there is no guaranteed protection for the increasing number of people who organise their holidays themselves and book flights directly through an airline. This makes it all the more important for consumers who decide to go it alone to take out comprehensive travel insurance that includes cover for scheduled airline failure.

Guarantees are another consideration when making a big-ticket purchase, and for most people, warranties issued by retailers that then go under become worthless and the terms cannot be enforced.

But it is often the case that warran-ties are issued by the manufacturer rather than the retailer, which means it will remain valid (as long as the manufacturer doesn't go to the wall) and consumers can still make a claim.

Consumers have added protection with extended warranties because they are usually backed by an insurance firm. "If it's a free warranty and that manufacturer goes out of business, then your opportunity for redress is limited," says Frank Shepherd at advice service Consumer Direct. "But if it's an extended warranty, the likelihood is that it will be with a separate insurer, in which case your warranty will still be enforceable." However, consumer groups such as Which? have long criticised extended warranties as being expensive and subject to pressured sales techniques by commission-hungry shop staff.

Consumer Direct advises shoppers always to check the wording of any warranty policy, extended or otherwise, carefully. They should ensure they know exactly who has issued the warranty, any exclusions in the cover (there may be many) and how to go about making a claim.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Trainee Consultant - Surrey/ South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before