Reclaim your cash from companies
Retailers and other firms are struggling to stay afloat amid the coronavirus fallout and various lockdown measures. We explain YOUR rights when a company goes into administration, and how to get your money back.
It means an insolvency firm has been called in to run the company, and get what cash it can for creditors, by selling or utilising its assets. In theory, a business can be kept running (or be sold) as a 'going concern', but this is unlikely in the long term.
Most likely, the insolvency firm will simply collect any assets, try and sell what they can, and then distribute whatever cash remains to creditors. The cash is dished out in order of priority, which usually works like this:
Secured creditors. If the company borrowed money secured on property/assets.
Insolvency practitioners. After all, if they didn't get paid, they wouldn't do the job in the first place.
Employees. Redundancy pay and wages, see Gov.uk for more information on this.
You've ordered something from a company that goes into administration before fulfilling your order. Whether you get your money back depends on the company's exact situation, and how far along your order's got since being placed.
But nothing's guaranteed, which is why routes such as credit card protection, detailed below, are so important.
If a company's in administration, it means it can't provide your goods or services, and the management's no longer in control. Yet it doesn't necessarily mean it's closed down completely.
The administrator's job's to maximise the value from selling off the company, and if keeping it as a going concern in order to sell it does that, then it'll keep trading. That may mean you can simply get a refund, or you receive the product as normal.
Otherwise, to be in with a chance of getting your cash, you'll have to apply to the administrator, not the company, and any cash left after paying the secured creditors and staff will be split between everyone who's submitted a claim.
If you need to get a refund through the administrators, don't count on getting all your money back. You may be lucky to get anything. If you do, it's often just a few pence per pound owed.
If what you purchased cost more than £100 (ie, £100.01+), and you paid all, or even just the deposit, by credit card, then your credit card company is as equally liable (as the retailer) under Section 75 of the Consumer Credit Act.
That means whatever rights you had with the retailer/company, you have with the credit card company, so you can get your money back from the card firm.
This is a legal protection that credit card companies have no choice about – when you spend on a credit card, you're entering into an arrangement to borrow (even if you pay off in full), so you get these rights.
If you suffered losses as a result of the administration, eg, you had a half-finished kitchen and needed to pay extra to get it finished, you may also be able to claim this additional cost from the card company.
For full details, including free template letters to reclaim from the card company, read the Section 75 guide.
Importantly, however, note that the £100 is for a single item. For example, if you ordered ten £90 kitchen stools – a total order of £900 – it won't count, though chairs sold as a set for more than £100 would qualify. With the former, it would still be worth giving section 75 a go, but it's unlikely to help, so read on.
If you paid on a Visa or Mastercard debit card for any amount, or Visa, Mastercard or Amex credit card for goods under £100, there's another step to try. It's called the Chargeback system, where your bank gets cash back from the company's payment processing bank.
Unlike with credit cards, this isn't a legal protection, but a protection from firms' internal rules. It's designed so that if you pay for something, and that order isn't fulfilled or a mistake is made, your bank can do a Chargeback from the bank that collected the payment. It's valid on:
You must do this within 120 days
The rules say you must complain within 120 days of realising there's a problem (not from the transaction date). This means if you're not able to start a Chargeback immediately, it's very important to diarise when you heard there was a problem, to ensure you you claim before the deadline. See Chargeback guide.
This is where it gets tough. You don't have any protection when paying by cash or cheque; though do remember that even if you only paid a penny on a credit card, if the goods are over £100, you're covered.
Sometimes the company sets up specific procedures, otherwise your best route is to apply to the administrator for a refund, by adding your name to the list of creditors. But it's not likely to yield much, maybe 10% back at best.
Many of the techniques in this guide are tried and tested, because of the administration of a company called Farepak in October 2006. If you have time, it's worth reading through some of the Farepak discussion, to see some of the Farepack victims' success stories, and how to coordinate your complaint.
You could also report your administration stories for others to learn from.
In a word, yes. Many high street retailers have gone into administration in recent years as shopping has shifted online – a process that has only been sped up by the coronavirus pandemic and subsequent lockdowns.
There's no certainty a company won't get into financial difficulties. So the best way to make sure you're protected is to do all bigger spending on your credit card, to get Section 75 protection. Just be sure to pay off the card debt in full at the end of the month, to ensure you're not charged interest.
Another resource is other customers in the same boat, so please report any updates and information in the administration discussion in the forum.
If you purchased a holiday as part of a package with an ATOL-protected travel agent (a financial protection scheme that tour operators can sign up to), you're covered for any part of the holiday where a company you're dealing with goes bust, be it flights, hotel or car hire.
In this situation, contact your travel company asap to organise travel or accommodation; thankfully the company's also responsible for any additional costs, so you won't be out of pocket. Use ATOL's search facility to check if your tour operator's ATOL protected.
However, it's crucial to understand that DIY holidays, where you book all the elements yourself separately (ie, flight, hotel, transfers), do NOT get any cover from ATOL. The only way to get any level of protection is via the Section 75 route above, so try and make sure you use a credit card for some of the cost - read the Section 75 guide.
Most travel insurance policies WON'T cover companies going bust, unless you specifically requested it and the provider agreed to include it.
Generally these are what I call the “Sad Fart” rights from the Consumer Rights Act 2015. That's because they must be Satisfactory quality, As Described, Fit for purpose And last a Reasonable length of Time. For more details on your statutory shopping rights, see the Consumer Rights guide.
It's here that the Section 75 rule above really comes into its own, if you have paid by credit card. That's because you have exactly the same rights with a credit card as with the retailer, which includes a breach of your statutory rights as well as administration, so you can ask it for a refund along the same lines.
If you bought on a debit card or it was for under £100, it's also worth trying Chargeback procedures.
Again, those paying in any other way will find this harder, but you can also make a claim to the administrators. If it doesn't agree to pay you, you'll simply join the queue of creditors, and your chances of getting any cash are slim.
If you've gift vouchers for a company and it goes into administration, then more than likely it's going to be tough luck for you.
However, don't chuck them away as soon as you find out that a firm has gone into administration. It's up to the administrators to decide whether the business will be wound up, or whether they want to continue to operate it as a going concern in the hope of attracting a buyer. And in the second scenario, you may still be able to spend your vouchers.
If the gift vouchers do turn out to be worthless, you could try making a chargeback claim. It's not guaranteed to work, and definitely won't if the gift vouchers were bought in a different store – for example, if you bought Debenhams vouchers at Sainsbury's and Debenhams went under – but it's worth a shot.
Finally, if nothing else works, you can apply to the administrators to be registered as a creditor of the business that's in administration. However, bear in mind that you'll join a long list of creditors, many of whom will be owed £1,000s by the business. If you get anything back, expect it to be a fraction of the value of the gift card.
Frankly, the best way to minimise the chances of you losing out is to spend gift vouchers as soon as you get them. The less time you hold on to them, the less likely it is that the company will go bust in the meantime.
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