Dundee LibDems voice concern over Farepak collapse
Dundee Liberal Democrats today (Friday 1st December) reinforced their concerns about the collapse of Farepak and the resulting misery for thousands of savers in the run-up to Christmas.
The Department of Trade and Industry is currently undertaking an investigation into the circumstances surrounding Farepak's failure.
Edward Davey MP, Liberal Democrat Shadow Trade and Industry Secretary said, "Liberal Democrats have been pressing Ministers to ensure that this investigation reports quickly, and that measures to help families affected are not delayed while we wait for its findings.
"Companies like Farepak bank their customers' money, without - in the first instance - providing a product or service. It seems clear to me that the financial security of the company and its customers should be protected effectively. The Times reported on 15 November 2006 that the 2005 accounts of Farepak disclosed a loan of £17million to the parent company EHR. In total Farepak had debts of £23.3million to other members of the EHR group.
"It is completely unacceptable for companies such as this to allow money collected for the benefit of their customers to be used outside the company, thereby jeopardising the financial security of the company, its savers and suppliers.
"Existing legislation places serious responsibilities on all company directors to act in the best interests of the company's shareholders whilst at the same time ensuring that the company only trades whilst still a solvent going concern. If directors are guilty of offences under this existing legislation they should be prosecuted. They may be liable to criminal prosecution, substantial fines and, in the case of wrongful trading, the possibility of being personally liable for losses of the company.
"If the current investigation shows the existing law is deficient, and that the Farepak directors did not commit an offence in the way they diverted customers' hard earned savings, the Liberal Democrats believe there is a strong case for new measures to plug such loopholes. Directors should not be able to siphon off savers' cash into other companies.
"We will also be proposing better financial education and increased information disclosure for savers about such schemes so that participants are fully aware of the risks associated with the scheme and the nature of their operations.
"Liberal Democrats have pressed for retail companies, HBOS and the British Retail Consortium to give generously to the Farepak Response Fund in light of their considerable profits, and the very difficult Christmas that so many Farepak customers will have in the absence of such donations.
Locally, Dundee LibDem spokesperson Allan Petrie said, "It is clear that the individual actions in this case of Halifax Bank of Scotland (HBOS) and Farepak's directors must be scrutinised thoroughly. Furthermore, lessons need to be learnt from this failure and effective measures implemented to protect consumers in future."