Co-op to launch first protected Christmas clubCo-op saving scheme to boost consumer protection

09 November 2012

Christmas piggy bank

The Co-operative Group is to become the first major UK retailer to launch a Christmas savings scheme which provides greater protection for consumers' money.

Because Christmas clubs are not regulated, they are not covered by the Financial Services Compensation Scheme (FSCS). This means that, should the worst happen and the company goes bust, consumers could stand to lose some or all their money. They also won't be able to turn to the Financial Ombudsman Service (FOS) for help if they can't resolve a complaint with the company directly.

To provide consumers with greater protection, the Co-operative is to set up a trust structure to protect savers' money. Full details of the Co-op scheme won't be revealed until it is launched in the New Year, but the development of the trust has been backed by the Farepak Victims Committee, which was set up after the Christmas club collapsed in 2006 resulting in nearly 120,000 people losing, on average, about £400 each.

Co-op will 'set a standard' for other Christmas savings schemes

Thousands of Co-op customers already save for Christmas by buying £1 stamps during the year, which they can then cash in when they do their festive shopping. Shoppers who buy stamps before the new scheme comes into effect will be able to redeem them as normal but won't be covered by the new scheme.

Speaking about the new protection, the Co-operative Group's Martyn Wates said: 'Our pioneering approach will give our customers added peace of mind and will set a standard for other businesses to follow.'

Deb Harvey, secretary of the Farepak Victims Committee, said: 'We are overjoyed at the announcement. We have been campaigning for six years because, as former customers and agents, we know only too well of the heartache caused by the Farepak collapse. This is a massive step in the right direction and demonstrates how The Co-operative is putting the customer at the heart of its business.'

Spend your Comet gift vouchers

Co-op's announcement comes a matter of days after electrical retailer Comet announced it had gone into administration, highlighting the lack of consumer protection attached to some unregulated financial products.

After initially refusing to accept gift cards as payment, Comet's administrators have since said gift vouchers bought by the general public can once again be redeemed at stores. Gift vouchers issued on behalf of corporate customers are still suspended.

The administrator said it intends to fulfil orders when the item is in stock and that if the item is out of stock and paid for by credit card customers may be eligible for a refund from their credit card provider. Find out more about your rights when paying by credit card by reading our guide.

If you've been affected by the failure of Comet, you can share your experiences on Which? Conversation.

More on this…

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  • Gift vouchers - understand the potential pitfalls and the alternatives