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What rights do consumers have when a retail business enters administration?

Published: 21/01/2019 By Lindsey Moore

We cannot escape the news that retailers are having a hard time at the moment.  HMV entered into administration (again) just after Christmas and it is likely that other retailers will follow in 2019.

Consumers are not always aware of where they stand if goods have been ordered and paid for online but not delivered. In an administration scenario, it is usually up to the insolvency practitioner to decide whether the order will be fulfilled. In law, the position is still determined by The Sale of Goods Act 1979 under which it is likely that the item still belongs to the retailer even if the consumer has paid for it.

This doesn’t seem very “fair” or make any sense to the consumer and, following a report by the Law Commission, the government has recently acknowledged that changes are required given the rise in internet sales which were not envisaged at the time of this Act.

Gift cards are a big problem, and are unlikely to be honoured, unless the administrator is seeking to preserve the “goodwill” of the business if he or she is seeking to sell it. Unfortunately it does not appear that the Government will be making any changes to regulate this area.

For the time being, other than making a claim in the administration, consumers have the following options:

·Make a claim under the Consumer Credit Act 1974 – for larger purchases over £100 where payment has been made by credit card, consumers can recover payment from the credit card company where the goods have not been delivered. Consumers should note that this is not possible where payment has been made through an intermediary such as PayPal or Amazon, although PayPal has its own buyer protection policy.

·Chargeback claims – although there is no legal right to a refund, consumers can try to recover payment from their card issuer under the chargeback regime.

Finally, for those who may consider using a Christmas savings club this year, there is currently no legal protection for consumers if the company enters into insolvency, although some schemes do have a voluntary protection scheme in place.

If you have any questions regarding any of the above please do not hesitate to get in touch, we always offer the first meeting free of charge with no obligations