PUNISH COMPANIES FOR ‘DAYLIGHT ROBBERY – Prentis tells Farepak meeting

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‘Many thousands of low paid workers, including many UNISON members lost money and faced a bleak Christmas as a result of the despicable behaviour of the companies involved,’ said UNISON General Secretary, Dave Prentis, speaking at the launch of a new report on Monday.

At the House of Commons launch of ‘Farepak: The Forgotten Victims Speak Out – An exploration of the harms caused by the collapse of Farepak’, Prentis added: ‘UNISON Welfare was able to help our members who lost out, but others were not so fortunate.

‘They were left to pick up the pieces, with little help from anyone, but family and friends.

‘Companies should not be allowed to get away with this sort of daylight robbery, and their directors should not be allowed to remain immune from the harm they have caused.

‘UNISON supports the demands for compensation and tighter regulation.

‘We also want the government to publish the companies’ investigations branch report into the affair and help lift the veil of secrecy.’

Victims of the Farepak collapse are demanding compensation, better regulation and for key figures in Farepak to be held to account for their actions, according to the new research.

Some 150,000 savers lost an estimated £50 million when the Christmas hamper scheme collapsed in October 2006.

The research, carried out by Dr Basia Spalek and Sam King of the University of Birmingham, also finds that many of the savers were low paid women prudently saving for Christmas who have been forced into a cycle of debt as result.

The research was commissioned by the Centre for Crime and Justice Studies at King’s College London and UNISON Welfare.

‘Farepak Victims Speak Out’ is based on in-depth interviews with Farepak savers and examines the impact on their lives.

Key findings include:

• Feelings of anger, anxiety and depression;

• Loss of trust in financial institutions;

• The sense of being kept in the dark about the fate of savings;

• Being forced into borrowing from relatives or taking out expensive loans.

The research also finds that little warning was given that the savings might be at risk.

In such unregulated markets, the authors argue, it is impossible for individuals to be fully knowledgeable consumers.

The research suggests a number of ways forward:

• All the savers should be fully compensated;

• The results of all investigations into Farepak should be made public;

• There is a need for enhanced, and mandatory, regulation of savings schemes;

• Improved information and advice for savers should be made available to enhance their understanding of the possible risks they may face.

Dr Basia Spalek, one of the report authors, said: ‘The idea that Farepak savers could protect themselves from the company’s collapse is clearly challenged by this research.

‘Policy discussion should be focused on the long term impact of financial harm and the appropriate regulatory responses, rather than the constant obsession with the slackening of consumer rights and company responsibilities.’

Richard Garside, director of the Centre for Crime and Justice Studies, said: ‘Most Farepak customers have still to receive compensation for the loss of their Christmas savings.

‘Many are asking why, if the government was prepared to underwrite Northern Rock to the tune of billions of pounds, no comprehensive help has been forthcoming.

‘As it is, a significant source of social injustice remains hidden and unaddressed by the government and the financial authorities.

‘Without concerted action other “Farepaks” are inevitable.’

The report’s Executive Summary says: ‘In October 2006, Farepak, a Swindon-based company,

collapsed, affecting an estimated 150,000 people who had saved with and/or worked for the company.

‘Farepak had run a Christmas club and hamper business since 1968.’

It adds: Farepak customers are estimated to have lost up to £50 million in the collapse.

Each customer has lost an average of £400, although some people have lost more than £2,000.

‘This executive summary presents the main findings of a research study that was undertaken to examine the experiences and perceptions of a group of Farepak customers and agents.

‘Farepak collapsed on 13 October 2006. Customers and agents were therefore left with a short space of time in which to organise Christmas within their respective households.

‘For some, this meant incurring credit card debt over and above that which they would normally have.

‘Others borrowed money from family members or in the form of bank loans: “Well, I had to borrow money because that was, like, all the money for Christmas shopping really. So fortunately my mum could lend me some money, but I mean it took me ages to pay that back because I was relying on that money. I was giving my son and my daughter both £100 each in, like, vouchers, and then I was going to get the Christmas stuff with the extra money.”

‘Some customers resorted to using credit cards.

‘Others had savings and they decided to draw upon these in order to make up the financial shortfall.

‘But, for some, the money that they had saved through Farepak was the only money that they had saved for Christmas 2006.

‘In some cases, individuals had tried to be prudent with their savings and attempted to avoid being drawn into a “vicious cycle of debt”, but some were forced to enter such a cycle.’

The report says: ‘For those individuals who had saved a significant amount of money with Farepak to then be offered relatively small amounts of compensation heightened their existing sense of social injustice.’

In its conclusions, the report says: ‘Many Farepak victims have been forced into a vicious “cycle of debt” in order to pay for Christmas expenses in 2006, having to draw upon savings to make up the shortfall, and borrowing from family members, banks and credit card companies.

‘Farepak victims are still waiting for adequate compensation for their losses, and have experienced ongoing psychological and emotional reactions including anger, depression and anxiety.

‘Former agents of Farepak report feeling responsible towards their customers for the loss of their money, with some taking it upon themselves to offer them money.

‘In some instances, agents were exposed to considerable animosity from their customers, being blamed for what had happened.

‘The knowledgeable consumer model appears to adopt a view of the consumer as an ideal rational being, who will assess potential risks, ask appropriate questions and translate this into a rational decision-making process.

‘In the case of Farepak, customers initially joined the scheme through, or with, friends, relatives or work colleagues, and so their rational trust of their friends, relatives and/or work colleagues played a large role in why individuals chose to save with Farepak in the first place.

‘The knowledgeable consumer model fails to consider, or to take into account, gender differences in experiences of saving and/or investment.

‘A key theme raised by this research study is that women were disproportionately affected by the Farepak scandal.

‘Farepak customers were being “prudent savers”, using Farepak as a way of managing their household finances, engaging in a number of strategies to manage their money safely.

‘The victims of Farepak want justice, demanding adequate compensation for their plight, for enhanced regulation and for key figures in Farepak to be held accountable for the harms that have been committed.

‘Interviews with victims show that the help provided by UNISON Welfare was unanimously regarded as a positive action, and many highlighted the financial assistance provided by the charity.

‘As well as being of practical benefit, this helped individuals to restore some of the trust that had been lost.’

It adds: ‘UNISON Welfare was the only benevolent charity in the UK to mount a coordinated response for Farepak savers.

Help from the official rescue fund amounted to 15p in vouchers for every pound lost but UNISON Welfare was able to increase this to at least 50 per cent or more for over 700 members who applied to the charity’s special fund for a grant.’