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Under the scheme from web firm Bondpay, which is registered with the Financial Services Authority (FSA), consumers pay it the cash which is kept in trust until the work is complete (see the Consumer Rights guide).

The money is held in an HSBC account where both the homeowner and the contractor can see it but not touch it.

If there is a dispute with the builder, Bondpay will step in and mediate. If the dispute gets serious, it will refer the pair to an independent arbitration service.

The company says its scheme also provides protection if the builder ceases trading.

Any builder can sign up though they will be charged 2.5% of the transaction value. Bondpay managing director Nick Egdell says it is likely this will be passed onto consumers, resulting in larger bills.

However, he points out they are paying for the guarantee, while they would pay 2% anyway if they pay on credit card, though many households pay by cash or cheque.

Egdell adds: "Bondpay gives these people reassurance their cash will be safe. Nothing gets into the builder's account until the work, agreed at the start, is done."

To use the system you must make a bank transfer to the HSBC account or send a cheque.

Users can make staggered payments so it does not all have to be handed over up-front.

What are the risks?

One risk to consumers' cash is in the unlikely event HSBC went bust.

If that happens, Egdell says their money is protected by the Financial Services Compensation Scheme's guarantee to protect up to £85,000 per person.

However, the typical cost of building work is £8,000, he adds.

If you pay for something on credit card you are protected anyway if work costing between £100 and £30,000 is not up to standard, even if you have only made part-payment on plastic.

Bondpay says it's the only company of its type where the payment process it uses is FSA registered.

Further reading / Key links

Make them play fair: Consumer Rights, Section 75 Refunds, Safe Savings