Farepak Christmas Consumer Prepayments

Region

United Kingdom

Associated With

Farepak - Christmas-hamper and voucher retailer

Defining Feature

Year-round payments for Christmas hampers and retailer vouchers

Status

Closed - Farepak entered liquidation during the group collapse in October 2006

Overview

Farepak let British customers spread the cost of Christmas hampers and shopping vouchers across the year.

Payments were usually collected through agents, often friends, relatives or colleagues. Customers were paying ahead for goods and vouchers, so their money lacked the protections attached to regulated bank deposits.

Farepak entered administration on 13 October 2006, before fulfilling its Christmas orders, and went into liquidation the following year. More than 100,000 customers were affected, leaving families facing Christmas without the purchases they had budgeted for.

Why It Mattered

Farepak exposed a gap between how customers used a Christmas club and how their payments were treated in law. Putting money aside felt like saving, yet it left families exposed to a retailer’s failure. In 2007, an industry agreement sought to protect payments through ring-fenced trust accounts. In 2016, the Law Commission recommended regulation of Christmas and similar schemes, recognising the risks of holding substantial sums for consumers who could ill afford to lose them.

How the Christmas Club Worked

• Farepak sold Christmas hampers and retailer vouchers, with customers paying towards them across the year.
• These payments were consumer prepayments for goods or vouchers, rather than protected bank savings deposits.
• Farepak’s daily customer receipts were swept into accounts held by its parent group, European Home Retail.

Collapse and Proceedings

• The European Home Retail group collapsed in October 2006.
• Farepak entered liquidation, while other group companies entered administration.
• The remaining 2012 director-disqualification proceedings were discontinued; this was not a criminal trial ending in acquittal.

Later Safeguards and Recommendations

• A March 2007 ministerial statement recorded an industry agreement for independently controlled, ring-fenced trust accounts, intended to protect payments towards Christmas 2007.
• The announced arrangements were a planned voluntary safeguard, not statutory protection.
• In 2016, the Law Commission recommended regulation of Christmas and similar schemes that posed particular risks to vulnerable consumers.

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