What are your consumer rights if a company goes bust?

If a retailer or other firm is seriously struggling, the first step may be for creditors to call in administrators to see if the business can be saved.

When a company goes into administration – whether it is a high-street business or online-only – this has serious implications for consumers, especially if the firm is wound up.

What happens if you have paid for but not received goods?

If you have ordered and paid for goods when the company goes into administration, there is a chance you will not receive them or get your money back from the firm.

This will depend on what the administrators decide. As a customer who is owed certain goods, you will join the business’ other creditors – such as banks and HM Revenue & Customs – in a queue to get your money back.

What happens if you bought faulty goods before the company went bust?

If you have bought goods from a retailer that is in administration and they turn out to be faulty, you may not be allowed to return them.

However, you should still be able to claim on a manufacturer’s warranty – white goods such as washing machines and dishwashers typically come with at least a 12-month manufacturer’s guarantee.

What happens if your holiday provider has gone bust?

Recent problems at firms such as package holiday firm Thomas Cook and airline Monarch have highlighted the importance of ensuring you’re protected when you book travel or an overseas trip.

If you book a package holiday, ensure it is covered by the ATOL scheme: this will ensure that you can get a refund or alternative accommodation, for example, if the provider goes into administration or liquidation.

If you are booking individual elements of a holiday separately, you will usually not be protected by ATOL – and most travel insurance policies do not include this kind of protection as standard. Instead, try to pay for at least part of these costs, such as airline tickets, using a credit card to obtain what is known as Section 75 protection (see below).

What happens if you have gift vouchers for a company that has gone into administration?

Often when a company goes into administration, it will no longer accept gift vouchers, although again this will depend on what the administrators decide.

This is worth bearing in mind when buying vouchers as a present. Instead consider vouchers which can be used at a wide range of stores, rather than at a single retailer, thus reducing the risk of them becoming worthless if a company goes into administration.

Claiming from your bank or credit card company

If your goods aren’t delivered or are faulty, or you have bought gift vouchers that are no longer being honoured, it may be possible for you to get your money back from the company which provides your credit or debit card.

With credit cards, this applies if your goods cost £100 or more, even if you only used the card to put down a deposit and paid the rest in cash or by cheque.

Under Section 75 of the Consumer Credit Act, lenders are jointly liable with retailers if something goes wrong – so you can ask your credit card firm for a refund.

If you paid with a debit card, or used a credit card for a purchase under £100, you may be able to claim from your bank on the Chargeback scheme.

This is not legally binding, but most banks adhere to it. Claims must be brought within 120 days of you finding out there was a problem.

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