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Government looking at boosting consumer protection when a supplier goes bust

The Department for Business, Energy and Industrial Strategy has launched a consultation designed to better protect consumers when a business they've bought from goes bust.

Under existing rules, which haven't changed since 1893, it's possible for items that a consumer's paid for but the company hasn't yet delivered to be considered as company assets. This means they can be sold off to pay the company's creditors.

However, the Department for Business, Energy and Industrial Strategy (BEIS) has asked the Law Commission to consult on changing this law in favour of the consumer. The idea is that where goods have been paid for, and earmarked for the consumer, or made specifically for them, they should be considered as belonging to the consumer, and not a business asset.

That means there's more chance of getting the goods if a firm goes bust. However, the consultation will determine on what stage of the process they become the customer's items - ie, at payment, at production or something else.

For more help on what to do if a company's gone insolvent while it has your cash, see our Administration Help guide.

What are the suggested changes?

BEIS has suggested the law be changed to include a list of scenarios where the customer would own the goods rather than the business.

This is designed to help in situations such as where a consumer's ordered made-to-measure curtains or blinds that they've paid for and not yet picked up or had delivered, and the supplier becomes insolvent. Another example would be where bespoke engraved jewellery had been paid for and finished, but not picked up before the firm went insolvent. 

The potential scenarios BEIS suggested could act as the trigger for the items being considered as belonging to the consumer include the following...

  • The items have been labelled with the consumer's name in a way that is intended to be permanent 
  • They've been set aside for the consumer in a way that is intended to be permanent
  • They're identified in some other way by the retailer, and the retailer intends the identification to be permanent
  • The items have been altered to a specification agreed between the consumer and the retailer
  • They're to be manufactured to a specification agreed between the consumer and the trader
  • They've been sent to a courier for delivery to the consumer or actually delivered to the consumer
  • Plus, when the consumer is told that goods bearing a unique identifier will be used to fulfil the contract
  • And when the consumer examines the goods and agrees they are to be used to fulfil the contract

However, BEIS points out this is a list of suggestions and there may be other scenarios. It also points out that this law change WON'T help in cases where a consumer has paid for their items, but they've not yet been manufactured or otherwise identified as being for that particular person.

What does BEIS say?

Consumer Affairs Minister Paul Scully said: "MoneySavingExpert has long been a champion of consumer rights and I hope its readers will support these proposed changes.

"The current rules on transfer of ownership are extremely complex and woefully out of date.

"When the rules were written, the internet did not exist. Today, over 20% of purchases are made – and pre-paid for – online.  

"We have asked the Law Commission to look at this, and they are consulting on legal changes that will update the law to make it fairer for consumers and reduce the risk of them missing out if they have pre-paid for goods but not yet received them if a company unfortunately goes bust.   

"These changes would make it much easier for those managing insolvencies to work out what belongs to who, meaning that goods that are clearly identifiable as belonging to a customer – such as an engraved ring or tailored blinds – will end up with their rightful owner.  

"This would bring Victorian rules into the 21st century – providing clarity for business and better protection for consumers."

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