New law helps shoppers get items they’ve paid for when businesses go bust

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SHOPPERS who’ve pre-paid for an item will have better protection if a business goes bust under, as MPs look to close a law loophole.

The new protection will help customers get the product they’ve paid for.

Under existing rules, items paid for in advance, but have yet to be sent to the customer, may be used to pay off debts if a company collapses.

This could include products that a customer has paid to have specifically tailored or altered.

Until the item is in the hands of the consumer, current laws state these items are still the property of the business.

These goods can then be held by the company’s administrators if the business goes under, potentially leaving consumers out of pocket.  

The change would apply to scenarios where, for example, a person may have pre-paid for a pair of blinds to be tailored to fit their windows. 

It would also benefit online shoppers, as goods aren’t immediately handed over to customers when buying from a website.

But annoyingly, the law won’t protect consumers if the item hasn’t been made yet.

If the item doesn’t exist, shoppers are advised to go through their credit or debit card provider for a refund – we explain more in the bow below.

The change in law would be an update on “transfer of ownership” legislation, which dates back to 1893.

The Law Commission will now consider the recommendations, although it’s already come up with a list of scenarios where the customer would benefit – you can see these in the box above.

Consumer affairs minister Paul Scully said: “With more and more people prepaying for goods online, it is so important our laws are up to date to reduce the risk of customers losing out if a business unfortunately becomes insolvent.  

“This consultation will look at how the law can be brought into the 21st century, providing clarity for those managing insolvencies and better protection for consumers.” 

Law Commissioner, Professor Sarah Green, said: “The current transfer of ownership rules are shrouded in complex language which consumers can find difficult to understand. 

“We believe it is time for the rules to be modernised so that consumers have clarity on their rights of ownership, especially in an insolvency situation.” 

The changes would build on the recent Corporate Insolvency and Governance Bill.

In more consumer rights news, we’ve rounded up everything you need to know about cancelling a holiday if you no longer want to go because of coronavirus.

Redundancy rights: How much notice must your employer give before making you redundant and do you pay tax on the payout?

New anti-fraud rules for bank transfers have come into into force – here’s how they will affect you.

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