Almost 4 years since the Farepak Christmas savings club collapsed, the 120,000 families affected are yet to receive a penny in compensation.
Farepak was a Christmas savings club allowing customers to choose Christmas hampers and vouchers, months in advance. They then made regular payments towards the goods over the year. It had around 120,000 customers and agents collected clients' funds.
Financial statements obtained from Companies House show profits of £1.283m for the year ending April 28, 2005 however Farepak ceased trading on 13th October 2006. Any payments made on or after 11th October were returned to customers.
Administrators were called in after Farepak's bank, HBOS, decided not to extend an overdraft facility to its owner, European Home Retail.
An estimated £37 million was lost by Farepak customers. The average Farepak customer was left £400 out of pocket, with some losing more than £2,000.
A 700 page report from The Companies Investigation Branch into the Farepak collapse has never been published. This is because counsel is still considering further legal action.
Initially, those who had lost money were to be reimbursed by liquidators at a rate of 5p in the pound. In April this year liquidators managed to secure a further £4 million from the directors of the company through legal action, meaning that this payment has increased to 15p in the pound. They failed to get the full £37 million back though.
It is not known which members of the Farepak board are contributing to the payout after agreeing the settlement, but none of the directors have admitted liability.
I appeared on ITV’s flagship ‘Daybreak’ morning programme hosted by Adrian Chiles and Christine Bleakley. Investigative reporter John Stapleton visited Wigan to learn more about the Farepak collapse as part of his research for today’s broadcast.
I saw at first hand the devastating effect of the Farepak collapse in my role as Chief Executive of St Helens CAB and I have vowed to continue the campaign for compensation started by my predecessor Sir Ian McCartney.
Four years on it is a scandal that not a penny of compensation has been received by farepak customers. These were pensioners and families on low incomes who were robbed of their Christmas after saving all year.
Farepak was marketed as a savings club and its customers regarded themselves as savers and not creditors at the bottom of the pile waiting and waiting for compensation. I do not want to prejudice any potential legal action that may be taken but I see no reason why parts of the government report cannot be placed in the public domain.
I welcome the formation of the Christmas Prepayment Association (industry self regulator eg Park is a member) but I am advocating people consider Credit Unions as a safe and secure alternative, backed by regulation protecting savings in the same way as banks and building societies.