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Farepak customers' outlook bleak Farepak 'faces claims worth £38m'
(about 2 hours later)
The administrator of collapsed Christmas savings club Farepak, has said it has received claims for £38m from 113,000 customers and agents. Administrators dealing with collapsed Christmas savings club Farepak have received claims for £38m.
But victims of the failed firm will receive no more than 5p in every pound they have lost, the administrator says. A total of 113,000 customers and agents have made claims so far, BDO Stoy Hayward said in a report to creditors.
"It is clear that Farepak did not adequately protect the money paid in," the report to creditors said. It also warned victims they would get no more than 5p in every pound they lost when the firm failed. More than 150,000 people lost an average of £400.
More than 150,000 people lost an average of £400 each when the company went into administration in October. The report also blames Farepak's collapse on its failure to "adequately" ringfence cash paid in by customers.
No protection "It is clear that Farepak did not protect the money paid in by agents and customers," the BDO Stoy Hayward report added.
Farepak customers paid monthly sums to the firm or its agents towards food hampers for the festive season. The administrators explained that Farepak's collapse was triggered by the fact £33m it lent to its parent company European Home Retail (EHR) was not paid back.
However the company went into administration leaving them with limited hopes of compensation. Investigation
The report, from administrators BDO Stoy Hayward, makes it clear that savers' money was not ring-fenced. Administrators now hope to move the firm into voluntary liquidation - which would allow its assets to be sold off and turned into cash to pay off creditors.
A voluntary fund set up in the run-up to Christmas raised about £7m to mitigate the effect of the collapse on Farepak savers. BDO Stoy Hayward added the move would also allow liquidators to investigate the collapse and sue "any parties responsible or liable" for its failure, and redistribute any money made from legal action to creditors.
Farepak customers paid monthly sums to the firm or its agents towards vouchers or food hampers for the festive season.
However when the company went into administration in October it left them with limited hopes of compensation.
A voluntary fund set up in the run-up to Christmas raised about £7m to mitigate the effect of the collapse on savers.
Legal hitch
But last month, members of the savings club were hit by a further setback after a High Court judge deferred some payments owed to members.
At stake was the legal status of money accrued between the collapse of Farepak and the time it went into administration soon after.
If successful, savers would have received sums ranging from £17 to £1,500.
A judgement in the case is due later this year.
Meanwhile, the Treasury has vowed to launch a review of Christmas saving clubs and the lack of regulations governing them - a move prompted by Farepak's collapse.