The chairman of the Commons Treasury Select Committee, John McFall, wants to revamp regulation of savings clubs in the wake of the insolvency of Farepak, the Christmas hamper seller.
In a letter last week to Sir Callum McCarthy, chairman of the Financial Services Authority (FSA), he urged the City watchdog to make savings clubs subject to regulations similar to those governing other providers of consumer financial products.
Farepak offered Christmas hampers and shopping vouchers in exchange for periodic cash payments throughout the year. The company owed 120,000 customers more than £40m when it filed for insolvency last month. Because it did not pay interest on the savings it accumulated, Farepak was not subject to regulations by the FSA.
"A lot of lower-income families used Farepak as a banking facility to save up for a good Christmas," said Mr McFall.
Ian McCartney, the minister for consumer affairs, last week talked to John Fingleton, the chief executive of the Office of Fair Trading, about implementing new rules.
An OFT statement said: "Although it is beyond the OFT's remit to assist those people affected, the minister has asked that it work with the Department of Trade and Industry and FSA to look at the regulatory framework in which Farepak operated and consider options to address any issues raised."
The Farepak collapse promp- ted MPs to call for Sir Clive Thompson - the former chairman of Rentokil who chairs Farepak's parent, European Home Retail - to lose his knighthood.
HBOS, the company's bank, last week agreed to contribute £2m to a Farepak response fund to help compensate those left bereft by the collapse. Tesco, Marks & Spencer and J Sainsbury have also contributed to the fund. Park Group, a rival savings club, has paid £1m to the fund.
BDO Stoy Howard is to be Farepak's administrator.Reuse content