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Boss attacks bank in Farepak row Farepak bosses may face MPs quiz
(about 6 hours later)
The chairman of the owners of Christmas savings club Farepak has said its bankers contributed to the collapse. The bankers and head of the company that owns of collapsed christmas hamper firm Farepak may be quizzed by MPs.
The Swindon-based hamper and voucher firm went into administration in October without offering compensation. Labour MP Jim Devine has asked the Commons Scottish Affairs Committee to formally question the parties.
Sir Clive Thompson said Halifax Bank of Scotland refused to support Farepak because of a £1.5m funding shortfall, says the Sunday Telegraph. Earlier, the group's chairman, Sir Clive Thompson, blamed Halifax Bank of Scotland for the firm's collapse. HBOS has rejected the claims.
An HBOS spokesman said requests to the bank by Farepak directors to "ring fence" savers' money were not serious. Swindon-based Farepak went into administration in October without offering compensation.
"The fact is that there was no money to ring fence" because the money was used as working capital by European Home Retail (EHR), Farepak's owner, said the spokesman. HBOS is to donate £2m to a fund for Farepak customers. An estimated 150,000 customers - mainly on low incomes - have lost an average of £400 each through Farepak's collapse, although some have lost closer to £2,000.
HBOS provided an overdraft facility to Farepak's owner, EHR. It was an HBOS decision not to extend EHR's overdraft that eventually led to administrators being called in. More than 100 Farepak savers have been to a meeting in West Lothian, with Mr Devine, the MP for Livingstone.
The bank had previously come under fire from critics but they had pointed out that it allowed Farepak to continue trading despite its problems. Mr Devine has said he wants Sir Clive and HBOS to "stand in front of Scottish MPs to answer questions we all want to hear".
EHR chairman Sir Clive was quoted by the Telegraph as saying Farepak's management was "hung out to dry" by HBOS. 'Hung out to dry'
Sir Clive said HBOS refused to support Farepak because of a £1.5m funding shortfall, says the Sunday Telegraph.
They're not considered financial products so the Financial Services Authority doesn't regulate them Ed Vaizey, Conservative MP
He was quoted by the Telegraph as saying Farepak's management was "hung out to dry" by HBOS.
He also said the bank rejected five proposed rescue packages between May and October.He also said the bank rejected five proposed rescue packages between May and October.
An HBOS spokesman told the Sunday Telegraph there was a "world of difference between a proposal and a viable solution". An HBOS spokesman said Farepak's requests for the bank to "ring fence" savers' money were not serious.
The fact is that there was no money to ring fence because the money was used as working capital by Farepak's owner European Home Retail (EHR), said the spokesman.
HBOS provided an overdraft facility to Farepak's owner, EHR. It was an HBOS decision not to extend EHR's overdraft that eventually led to administrators being called in.
Response fundResponse fund
The Department of Trade and Industry has launched an investigation into what happened at Farepak.The Department of Trade and Industry has launched an investigation into what happened at Farepak.
And a fund has being set up to help the thousands of families affected. Customers have lost about £400 each on average, though some have lost closer to £2,000. A fund has also been set up to help the thousands of families affected, firms that have promised to donate money include HBOS, Christmas hamper supplier Park Group and Marks & Spencer.
HBOS is to donate £2m and Tesco, Marks & Spencer and Morrisons have offered money. Paul Munn, a non-executive director of EHR, told the BBC the board had made "strenuous efforts" to tackle the problem, adding: "Clearly, we're very saddened by the situation.
They're not considered financial products so the Financial Services Authority doesn't regulate them Ed Vaizey, Conservative MP
Christmas hamper supplier Park Group is donating £1m of High Street vouchers to the fund and Sainsbury's and John Lewis have agreed that Farepak customers can get 25% of the value of their savings in vouchers for their stores.
Paul Munn, a non-executive director of EHR, told BBC Radio Five Live the board had made "strenuous efforts to address the situation up to the point when it was not capable of being taken forward".
"Clearly, we're very saddened by the situation," he said.
"No-one likes to see any company fail or let its customers down. That's absolutely to be regretted.""No-one likes to see any company fail or let its customers down. That's absolutely to be regretted."
Debbie Black, who was both a Farepak agent and customer, said she thought the company bore the ultimate responsibility for the situation. Let down
Farepak agent and customer Debbie Black said she thought the company bore the ultimate responsibility for the situation.
"At the end of the day we are putting our trust in Farepak and the parent company EHR and our money should have been safeguarded by them - they shouldn't rely on the bank to make safeguards."At the end of the day we are putting our trust in Farepak and the parent company EHR and our money should have been safeguarded by them - they shouldn't rely on the bank to make safeguards.
"It should be down to the directors of the company to do it anyway.""It should be down to the directors of the company to do it anyway."
Meanwhile, Conservative MP Ed Vaizey said he was unhappy about the rules governing clubs such as Farepak.Meanwhile, Conservative MP Ed Vaizey said he was unhappy about the rules governing clubs such as Farepak.
"They're not considered financial products so the Financial Services Authority doesn't regulate them," he said."They're not considered financial products so the Financial Services Authority doesn't regulate them," he said.
"There's no compulsion on the companies to provide insurance in case the company goes under to help compensate people who suffer as a result." As a result, if such a company fails, it does not have to compensate its customers, he added.