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Tuesday, May 17, 2022

Christmas savings clubs money to be protected by new laws

Christmas savings clubs money to be protected by new laws

Savings clubs for shoppers will soon be protected under new laws to be introduced by the government.
Many families pay into schemes throughout the year to spend on Christmas, weddings or home projects.

These clubs are not yet covered by the Financial Services Compensation Scheme.

But new laws mean even if the company goes bust, shoppers' money will still be protected. It is aimed at preventing scandals like the collapse of Christmas savings club Farepak in 2006.

When the Swindon-based company folded, it left 116,000 customers with losses of £37m and many unable to pay for festive gifts.

Many UK supermarkets and other businesses have a Christmas savings club, allowing customers to top up an account throughout the year and receive products and services in time for Christmas.

The average family spends about £740 extra in December, analysis from the Bank of England has shown.

Consumer minister Paul Scully said that families' hard-earned savings needed to be protected now more than ever due to the cost of living crisis.

"New laws will crack down on dodgy dealers who have no plans in place to protect shoppers' savings if their business goes to the wall," he said.

"We'll make sure scandals like Farepak never happen again, where thousands of families, many on low incomes, lost all they had saved for Christmas."

The law will apply to Christmas savings clubs and other prepayment schemes that are forms of a savings club.
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