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
Sunday 01 March 2009
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; request a free guide on NISAs from Hargreaves Lansdown
The HiFX guide to international money transfers
Five Questions: Changes to car tax discs
Bargain Hunter: There's one day left to book a bargain flight with Air Asia
A student's guide to financial survival: You don't have to drown in debt at university
How to save money: UK is crashing down the European league table for putting money away
- 1 Joan Rivers: 'Palestinians deserve to be dead'
- 2 Perez Hilton apologises for Jennifer Lawrence nude photo leak
- 3 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 4 Mexican woman becomes world’s 'oldest person' at 127
- 5 Isis terror threat: Leading British Muslims issue fatwa condemning terror group
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Do you realise just how foolish the UK looks?
With Douglas Carswell joining Ukip, my party has taken another giant step forward
iJobs Money & Business
£70000 - £75000 Per Annum: The Green Recruitment Company: Katie Robinson +44 (...
£40000 - £45000 per annum: Ashdown Group: An established professional services...
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
£28 - 32k + Uncapped Commission: Guru Careers: A Business Development Manager ...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony