What should you do if a firm goes bust?
When a retailer goes bust, the key thing is to act quickly. The longer you wait, the harder it becomes to get your cash back, according to James Walker, founder of complaints help site, Resolver.
He said: “When a firm goes bust owing you money, goods or services, then you join a queue of people known as creditors. As a consumer, you’re generally last in the queue for cash and in practice, once investors, insolvency fees and employees have been paid, there’s little money left.”
It can be better to use other options available to you, such as statutory protection or credit card schemes. For financial services, this might be the Financial Services Compensation Scheme (FSCS), but at the moment there is no scheme to compensate shoppers when a firm goes bust.
How to get your money back
Walker gives the following tips:
Paid by credit card?
You’ve got lots of statutory protection if you pay for goods or services using a credit card, thanks to the Consumer Credit Act. It states that if you pay for things on a card that cost over £100 and less than £30,000 you could claim the money back from the card provider.
You don’t even need to have spent the whole amount on the card as long as the deposit falls within the limits. This is known as making a claim under ‘section 75’. Credit providers aren’t really thrilled about this as they can end up forking out for businesses that go bust. But it’s your first line of defence. They may try to recall your payment first – which is just as good.
Paid by debit card?
It’s not a legal right, but the card providers run a scheme called ‘chargeback’ which means you might be able to ask them to recall your money if there’s a problem. The schemes all have slightly different rules depending on the service provider. But act quickly: if a firm has already gone bust it may be too late. Give the debit card provider a call and ask them to charge back the money as soon as possible.
Paid electronically (eg via PayPal or Skrill)?
Using electronic money services like PayPal also gives you some rights, so lodge a claim using the firm’s dispute resolution rules. Like credit and debit cards, you can go to the Financial Ombudsman Service for free if you’re still unhappy with the way the claim is handled.
The majority of insurance policies don’t cover firms going bust – which comes as a surprise to many people. And where there is cover, you may be bounced back to card providers first by their insurers. While you should try this regardless, if you have a warranty or other insurance policy that does seem to cover bankruptcy, there’s no reason why you can’t claim on your insurance policy so don’t be dissuaded.
Other payment methods
If you’ve paid by cash, cheque or direct transfer, you’ve got no rights to recall your money if a firm goes bust. Always question businesses that ask for payments this way and don’t pay if you can’t afford to lose it.
Vouchers and gift cards
If a firm goes bust, then often vouchers you may have with them become invalid. They are generally treated as cash you are owed. Some firms that have gone in to administration have honoured their vouchers. But if you hear rumours that a business is in trouble, don’t delay – use your vouchers and gift cards before it’s too late.