What to do when shops go bust How you pay for goods
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The current recession has seen big shops such as MFI and Woolworths bite the dust, which could mean that shoppers are left without the goods they ordered or the money they spent. This guide outlines how you can protect yourself.
How you pay for goods makes a big difference in what protection you have if something goes wrong.
Paying by credit card
If you make a full or partial payment on your credit card for an item costing more than £100 but not more than £30,000, you may be able to get your money back (or what you have to spend to get an equivalent item elsewhere) through section 75 of the Consumer Credit Act 1974. This makes your card provider equally liable for the company’s breach of contract.
What to do
Write to your card provider to make a claim. Include related paperwork and state that the provider is equally liable for your claim under section 75 of the act. You have six years from the date of the breach of contract (ie when the seller fails to provide the goods) to make a claim. It’s five years in Scotland.
If you’re not happy at the end of the provider’s complaints procedure, complain to the Financial Ombudsman Service (FOS) within six months of its final letter to you. You can also complain to the FOS if the provider doesn’t deal with your claim within eight weeks.
If you’ve received only some of the goods ordered, such as parts of a new kitchen, you can make a section 75 claim for what you have to pay to get the other items elsewhere. If the retailer arranged finance for you to pay for goods costing between £100 and £30,000, you can make a section 75 claim against the finance company.
Paying by debit card
If you paid using a Visa debit card, or you used a Visa or MasterCard credit card, it may be possible to get your money back via ‘chargeback’ - which is useful for goods costing less £100 that s75 doesn't cover. This means the card provider can try to get your money back from the merchant on your behalf, although it's not legally obliged to.
What to do
Contact your card provider (within 120 days) to claim and complain to the FOS if you’re unhappy with the response from your provider.
Other ways of paying
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Cash, cheque or non-Visa debit card
If you paid for goods or services by cash, cheque or a non-Visa debit card, it’s unlikely you’ll get your money back. It may be possible to get your goods if they’re clearly identifiable as yours – in the company’s warehouse with your name on, for example. If a product under warranty breaks after a shop goes bust, you may be able to claim on the warranty if it’s from the manufacturer.
Vouchers
When you have vouchers to spend with a shop, this acts as a contract between you and the retailer, like any purchase. If the company goes bust and you can’t spend them, claim as you would for any breach of contract under section 75.
Will you get your money back from the company?
When a company is in trouble it may appoint an administrator to try to rescue it. If it can’t be saved, the administrators will try to get the best deal for the people or groups it owes money to (creditors).
It’s unlikely the company will be able to pay back all the money it owes. It must pay ‘secured’ creditors, such as a mortgage lender, and ‘preferential’ creditors, which includes HM Revenue & Customs and employees, first. Any money left over will go to ‘unsecured’ creditors. This includes customers who've been affected, such as you.
How to claim your money back from the company
If a company goes into administration and doesn’t deliver the goods or services it promised you, it’s breaking a contract with you. Write to the administrators, including copies of any paperwork, to claim for this as a creditor.
The company may contact you directly about what will happen telling you things such as who the adminstrators are. Or it may post the information on its website.
You can find out who the administrators are from the Companies House website or by phone (0303 123 4500).
But if you are an unsecured creditor, it’s unlikely that you’ll get back all your money by registering as a creditor and the process could take a long time.
If the shop is part of a larger group, you’re not entitled to claim from its parent firm if the shop is a company in its own right. Check on the company’s website or Companies House.