Thursday 29 April 2010

How fair is the Farepak settlement?

How would you feel if you'd saved £400 for Christmas but only received £60? Probably you'd be pretty angry, but that's what's happened to the 150,000 or so people who saved with the Christmas savings club Farepak.

It went bust over three years ago taking millions of pounds with it. I covered the Farepak story at the time when I was was a freelance reporter for BBC Breakfast and I spoke to someone who'd saved hundreds of pounds with Farepak and - as an agent - had encouraged her work colleagues to do the same. She was furious, not only because she'd lost out, but because she genuinely believed that she was helping her colleagues by encouraging them to save.

At the time, credit was easy but the people who saved with Christmas clubs like Farepak liked the idea of locking money away throughout the year. The reward for this prudence was knowing they'd have extra cash to spend at Christmas.

It's taken three years of work by the liquidators (whose fees come directly out of the money available to creditors) to come up with the settlement of 15 pence in the pound. Pretty poor, in my opinion. The only positive bit of news is the fact that it's brought the wait for compensation to an end.

The situation has improved in that Christmas clubs that are members of the Christmas Prepayment Association now have to pay customers' money into a trust account, so the cash is kept separate from the companies' own money. This is big step in the right direction. But when over 150,000 people are still down by 85% on money they saved in what they thought was a safe scheme, I don't think anyone can say enough has been done.