Reclaim your cash from companies
During the recession, many unexpected companies went bust, including big names like Woolworths, Dreams & Comet. It's less common now the downturn's over, though it does still happen to big companies now and then.
This is a full Q&A on what your rights are when a company goes into administration, plus whether and how you can get your money back.
In this guide...
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 then dished out in order of priority, which usually works a bit 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.
If you ordered with a company, and it went into administration before fulfilling it, then whether you get your money back depends on the company's exact situation, and how far along your order's got since it was placed.
Yet 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'll be split between everyone who's submitted a claim.
If what you purchased cost £100 or more, 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.
In other words, whatever the rights you'd have had with the retailer/company, you have with the credit card company, so you can get your money back from it.
This is a legal protection that credit card companies have no choice about, as 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 be able to claim this from the card company too.
For full details on this, including free template letters to reclaim from the card company, read the Section 75 guide.
However, it's important to note, the £100 is for a single item. Even if you ordered ten £90 kitchen stools, while the total order is £900, it won't count (though chairs sold as a set for more than £100 would). In these cases, give section 75 a go, but it's likely it won't be able to help you, so read on.
If you paid with 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 state you must complain within 120 days of realising there's a problem (not from the date of the transaction). This means if you're not able to start a Chargeback immediately, it's very important to diarise the day you heard there was a problem, to ensure you start your claim before the deadline.
Read more about Chargeback.
This is where it gets tough. You don't have any protection when paying by cash or cheque; though do remember 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's to apply to the administrator for a refund, by adding your name to the list of creditors. Be prepared that 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. Lingerie chain La Senza went into administration for the second time in July 2014. High street giants Blockbuster and Barratts Shoes collapsed in November 2013, and big electrical retailer Comet collapsed in November 2012. Perhaps the biggest shock was the century old chain Woolworths, which went bust in 2008.
Even though the economy is recovering, there's no way to know whether a company's at risk. So the best way to make sure you're protected is to do all bigger spending on your credit card, in order to get Section 75 protection. Just be sure to pay off the debt in full at the end of the month, to ensure you're not charged interest.
The other resource is other customers in the same boat, so please report any updates and information in the administration discussion in the forum.
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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.
If goods, digital content or services purchased from a company that goes into administration become faulty in any way, you still have rights.
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 bust. 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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