UK

Farepak: MP urges quicker compensation

  • 22 January 2012
  • From the section UK
Farepak sign
Image caption Farepak had run a Christmas club and hamper business since 1968 before its collapse in 2006

An MP has urged the government to speed up the compensation process for Farepak families after it emerged 200 customers have died before receiving money.

Around 122,000 customers made claims worth £38m when the Christmas hamper firm went into administration in 2006.

The information came in a letter from Farepak's liquidators to Mike Weir, the SNP's Westminster spokesman for consumer affairs.

The government said it could not intervene in an insolvency process.

Many of those affected by the collapse of the firm were on low incomes - the average amount lost was £400.

Liquidators BDO Stoy Hayward's letter said: "I can confirm that any dividends will be paid to the next of kin or, where applicable, the estate of the agent or customer."

Mr Weir said the revelation was "sad and unacceptable" and the fact liquidations could take years to finalise was "seriously wrong".

"It is five years since Farepak collapsed, but that nightmare of Christmas past is still being felt by many low income families. Savers are likely to recover just 5p in the pound, while the final bill for the administrators and their legal advisers has already exceeded £8m."

'Sad scandal'

He said UK insolvency regulation had failed and part of the problem was it was largely self-regulated with no independent complaints procedure.

The Farepak Victims Committee also called on the government to intervene. It has created a government e-petition calling for full compensate to victims, and better financial regulations to be put in place.

Its chair, Louise McDaid, said: "It is simultaneously sad and a scandal that 200 people have died before receiving a single penny compensation due to the long drawn-out process of liquidation, yet the banks and the liquidators have been paid out. How can this immorality be justified?

"I would urge everyone to support our government e-petition. There needs to be regulations put in place to stop this from ever happening again."

Payments worth a total of £240,000 were sent in 2009 to 5,900 customers whose money was put into trust by the firm just before it went into administration.

It was paid after a court was asked to rule whether the trust, which was not set up properly, actually existed and who should be reimbursed.

Those who placed their orders before the cut off date were unaffected by the court's ruling and victims were told to expect just 5p for every pound spent.

A government spokesman said: "It is upsetting that some creditors have passed away while the liquidation process of Farepak is ongoing, but the government cannot intervene in the conduct of an insolvency and administrations may in any event be subject to scrutiny by the Court.

"The liquidators of the company have agreed 116,439 agent and customer claims, totalling approximately £37m, and work by the liquidators has resulted in the possible amount payable in the future to creditors increasing from 5p in the pound to 15p in the pound.

"The creditors' committee - which represents those who have lost money - have received regular detailed reports on the progress of the liquidation and have approved the actions of the liquidators."

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