Who should pay out when companies fail?
With Dolphin and Möben calling in the administrators and Habitat in trouble, the high street’s ‘doing another Woolworths’. Many have paid for goods they may not receive, so who should pay out when a company fails?
If you’ve paid a deposit by cash to a company that’s gone into administration, chances are you can kiss your dosh goodbye. Unless there’s a kitchen with your name on it in their warehouse, you’ll probably have to stake your claim alongside other unsecured creditors, with little chance of getting your money back.
The same goes for anyone who’s paid by cheque (suggesting that the mighty cheque isn’t quite as good as every seems to think…?)
Is this fair? Probably not, but the alternatives aren’t any better. Forcing retailers to shoulder the burden of business failure insurance would be a false economy, paradoxically forcing many more of them out of business. This in turn would raise the cost of insurance, leading to more failures. And so on.
The answer: get a credit card
If you paid by credit card and the retailer didn’t deliver, you could put in a claim to your credit card company under section 75 of the Consumer Credit Act.
Even if you only paid the deposit on your card and the rest another way, you could put in a claim for the full amount – section 75 is based on the cost of the item, not the amount paid on the card. Section 75 even allows you to choose between putting a claim into the retailer and claiming against your card provider.
And yet, someone wrote to me a while ago telling me off for encouraging consumers to put in a claim to their credit card provider under section 75 – it’s not fair on the banks, he said. Instead, he continued, we should pursue the retailer, either as a company if they’re still trading, or the liquidators and management if they’re not.
Nonsense. Credit card providers sign up to the terms of the Consumer Credit Act when they decide to enter the credit card market. And section 75 is, in effect, an insurance policy against things going wrong.
We pay for this protection
All of us are paying for this insurance through the high APRs we pay and the transaction fees imposed on retailers, which in turn is passed on to us in higher prices.
If you had an accident in your car, your first thought wouldn’t be whether you’ll hurt Sheila, Churchill or the Admiral’s feelings by putting in a claim. Given the choice between losing my deposit and getting my credit card provider to shell out, there’s no contest.
If you’ve already been affected by a company failure, credit card users can breathe a sigh of relief. And if you paid by debit card, you may still be ok – you can put in a chargeback claim.
If you paid by cash or cheque, Dolphin’s competitor Bathstore may be your only hope, as it has offered to knock any lost Dolphin deposit off the price of one of its own bathrooms. It’s not fair, but I can’t think of a better system.
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