Shops – What to do when a Company goes Bust

In this testing period for our economy, we are hearing more and more horror stories of businesses taking your money and subsequently going bust. From the wedding day present organiser to online fashion retailers. However, how can you protect yourself and what do you do if this ever affects yourself?
Protect Yourself
Pay for goods that cost over £100 but not more than £30,000 using a credit card and you will be covered by section 75 of the Consumer Credit Act 1974

Make sure that the period between paying for the goods and you receiving them is as short as possible

If a firm goes bust and breaches contract, register as a creditor with the administrators

Make a chargeback claim if you paid by a Visa debit card or by a Visa or MasterCard credit card for goods under £100

Visit the shop or its warehouse to claim goods that are obviously yours, for example they are labelled with your name

Credit card payments through online payment system PayPal aren’t covered by section 75
Paying by credit card
If you make a full or partial payment on your credit card for an item costing more than £100 but not more than £30,000, you may be able to get your money back through section 75 of the Consumer Credit Act 1974. This makes your card provider equally liable for the company’s breach of contract.
What to do
Include the related paperwork and state that the provider is equally liable for your claim under section 75 of the act. You have six years from the date of the breach of contract (ie when the seller fails to provide the goods) to make a claim.

If you’re not happy at the end of the provider’s complaints procedure, complain to the Financial Ombudsman Service (FOS) within six months of its final letter to you. You can also complain to the FOS if the provider doesn’t deal with your claim within eight weeks.

If you’ve received only some of the goods ordered, such as parts of a new kitchen, you can make a section 75 claim for what you have to pay to get the other items elsewhere. If the retailer arranged finance for you to pay for goods costing between £100 and £30,000, you can make a section 75 claim against the finance company.
Paying by debit card
If you paid using a Visa debit card, or you used a Visa or Mastercard credit card, it may be possible to get your money back via ‘chargeback’ – which is useful for goods costing less £100 that section 75 doesn’t cover. This means the card provider can try to get your money back from the merchant on your behalf, although it’s not legally obliged to.
Will I get back my money back?
When a company is in trouble it usually appoints an administrator to try to rescue it. If it can’t be saved, the administrators will try to get the best deal for the people or groups it owes money to (creditors).

Although unlikely the company will be able to pay back all the money it owes. It must pay ‘secured’ creditors, such as a mortgage lender, and ‘preferential’ creditors, which includes HM Revenue & Customs and employees, first. Then any money left will go to ‘unsecured’ creditors. This includes customers who’ve been affected, such as you.