Farepak’s collapse costs £8.2m in fees

Jan Harris | November 28, 2011 | 0 Comments

Fees for dealing with the administration and liquidation of Farepak, which ran a Christmas savings club, have now totalled £8.2m, far more that the £5.53 million of compensation promised to customers.

Farepak collapsed in 2006, when nearly 120,000 Christmas club members lost an average of £400 each.

Just 6,000 customers, who made cash deposits immediately before the business failed, have received any payments to date, as these deposits were dealt with separately.

In April 2010, after administrators from BDO agreed a settlement with Farepak’s directors, a final financial offer of 15p in the pound was made to customers, representing just £5.53m of the £38m they were collectively owed.

However, the latest documents filed at Companies House show that fees for lawyers, administrators, insurers and other professionals involved in the administration and liquidation of the company, amount to £8.2m.

Many of the people who paid into the Christmas Savings Club were on low incomes and the Farepak Victims Committee is calling for the Government to ensure that members of this type of savings club are protected in the same way as bank customers are protected.

Christmas Savings Clubs tend to attract savers on low incomes because small amounts can be saved over the year and the money can be repaid as vouchers, food hampers and other goods, which removes the temptation of spending the money elsewhere.

However, there are alternatives which offer greater protection for savers, as well as interest to help prevent the savings depreciating in value by the time Christmas comes around.

Many Credit Unions offer Christmas savings plans to members, accepting deposits as small as £1 and holding the money in an account that is not accessible until November.

Building Society are also gearing up to launch Christmas accounts ready for next year, including Skipton Building Society which is due to launch its My Christmas Saver account tomorrow.

Another alternative is the Post Office’s Christmas Club, which is ideal for anyone who finds it difficult to get to a bank, although it does not pay any interest.

The Post Office scheme offers a prepay cash card which is unlocked in November and can then be used to pay for goods at thousands of retailers including Debenhams, Argos and PC World.

Savers can make deposits as small as £2 and at the end of October they receive money-off vouchers to use at retailers participating in the scheme.