Linda Fabiani MSP for East Kilbride has joined the calls from her Westminster SNP colleagues to call on the UK Government to step-in and speed up the compensation process for Farepak families after liquidators confirmed in a letter that 207 agents and customers of the Christmas saving scheme have died since the collapse five years ago.
Many East Kilbride customers lost Christmas savings when Farepak collapsed in October 2006 owing £37m to more than 119,000 savers (20,000 customers in Scotland). More than five years later, savers are likely to recover just 5p in the pound, while the final bill for the administrators and their legal advisers has already exceeded £8 million.
Linda said “It is five years since Farepak collapsed, but that nightmare of Christmas past is still being felt by many low income families. Savers are likely to recover just 5p in the pound, while the final bill for the administrators and their legal advisers has already exceeded £8 million.
“Many people in East Kilbride were affected by the collapse, causing Christmas misery, unfortunately that misery continues to rumble on and on.”
The SNP, who have already called for an investigation into the workings of the insolvency industry, said the situation underlined a failure of regulation and contrasted UK Government’s response to bailing out the banks with Farepak.
Angus Robertson SNP MP said “ It is sad and unacceptable that, five years after Farepak collapsed, more than two hundred customers have died waiting to receive any of their money back.
“There is something seriously wrong when liquidations can take years to finalise and people are actually dying before the insolvency gravy train comes to a halt.
“It is simply disgraceful that, years after the company collapsed, that customers are still waiting to get any of their savings back.
“Just like the banks, current UK insolvency regulation has failed. Part of the problem seems to be that the industry is largely self-regulated. Insolvency work is handled by licensed practitioners, most of whom work for accountancy firms.
“The practitioners are in turn regulated by accountancy and law professional bodies, which have no independence from the firms they regulate. What’s more, there is no independent complaints investigation procedure or ombudsman to adjudicate on malpractices – there are no questions over fees or delays.
“UK Ministers should step in without further delay bring this sorry tale to an end and ensure that the savers receive a reasonable return rather than their money going to swell the already bulging pockets of large accountancy firms.”
1. In a letter Farepak’s liquidator (BDO LLP) confirmed: “To date, I have received notification of the death of 207 Farepak agents and customers. I can confirm that any dividends will be paid to the next of kin or , where applicable, the estate of the agent or customer.”
2. Research by Mr Weir has shown that Farepak families are not alone in losing out, with other High Street and high profile examples include:
– Zavvi, the music retail chain which went into administration in November 2008, owing unsecured creditors nearly £185m – including 510,000 unredeemed vouchers worth an estimated £4.1m. Creditors are just receiving 15p in the pound, while administrators Ernst & Young collected millions in fees.
– Furniture chain, Land of Leather, went into administration with debts of £37m in January 2009. Creditors received just 9p in the pound, while administrators Deloitte and Touche collected fees of £2.5m.
– Liquidations have no statutory time limit and some, such as the Israel-British Bank, which entered liquidation in 1974 was only finalised in September 2009. Also in 1974, holiday firm Apal Travel went into liquidation – finalised only in August 20089 by which time some of the holidaymakers entitled to receive the 74p in the pound settlement had probably died in the intervening 35 years.
– indeed, more than 19,500 liquidations started five years or more have not yet been finalised.
– 6,629 liquidations started 20 years or more ago have not yet been finalised.
– The level of fees charged by insolvency practitioners is not regulated.