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Farepak: Compensation

Volume 475: debated on Thursday 15 May 2008

To ask the Secretary of State for Business, Enterprise and Regulatory Reform what plans the Government has to provide compensation to those who lost savings as a result of the collapse of the Farepak Christmas savings club in 2006. (200373)

The Government are entirely sympathetic to the plight of those who lost money in the Farepak collapse, and were strongly supportive of the commendable efforts of the Farepak Response Fund appeal, which raised £8 million from business and members of the public to help those affected.

For the future, the Government have taken steps to provide better protection and information for consumers. We have worked with the other hamper companies to put in place effective protection for customers’ prepayments. The companies have responded by introducing new safeguards for consumers’ money in the form of independently-controlled, ring-fenced trust accounts. These arrangements will be monitored by a new trade body, the Christmas Prepayments Association, under the terms of a new code of practice. We understand that the Association will be seeking approval of the code by the OFT under the terms of its consumer codes approval scheme. The Government have also given the Office of Fair Trading £1 million for a new awareness campaign so that consumers are better aware of their options for Christmas savings and are empowered to make decisions that are right for their own circumstances. However, the Government have no plans to provide any compensation in this case.