A consultation was launched by the Department for Business, Energy and Industrial Strategy (BEIS) to better protect customers when a company they have purchased something from goes into liquidation. Dealing with a company that has recently become insolvent can create a headache for many consumers.
Under the current rules, which have not been altered since 1893, goods that a customer has paid for but have yet to be delivered are considered to be company assets. What this means is that these items can be sold off to ensure the company’s creditors are paid after the insolvency.
The Law Commission has been asked by the BEIS to consult on changing this law in favour of the consumer. This will make sure that paying customers do not have their goods set aside or altered in a way that could identify a consumer’s ownership. The items in question should not form part of the business’ assets, and should be considered as belonging to the customer.
The governmental department has proposed that the law be updated to include a list of scenarios where the customer would have ownership over the product instead of the company. These recommendations will help in scenarios where a consumer has ordered a custom item e.g. a piece of furniture that they have paid for but it hasn’t yet been delivered or collected, and the provider goes bankrupt.
Paul Scully, Consumer Affairs Minister, said: “The current rules on transfer of ownership are extremely complex and woefully out of date. When the rules were written, the internet did not exist. Today, over twenty per cent of purchases are made – and pre-paid for – online.
“We have asked the Law Commission to look at this, and they are consulting on legal changes that will update the law to make it fairer for consumers and reduce the risk of them missing out if they have pre-paid for goods but not yet received them if a company unfortunately goes bust.”
Although this applies for products, many energy customers may be unsure about what this means for services such as gas and electricity. Fortunately, Ofgem has plans in place to ensure you’re not without heating or power should an energy supplier enter into administration.
According to Ofgem, it’s unlikely that your energy supplier will go out of business. If it does, the energy regulator’s “safety net will make sure you’ll always have an energy supply, and will feel as little change as possible”.
Your energy supply will not be disrupted and you won’t notice any change, other than a new provider being appointed to take over. Following a competitive process that is designed to get the best deal for you, Ofgem will choose your new energy supplier.
Mr Scully added: “These changes would make it much easier for those managing insolvencies to work out what belongs to who, meaning that goods that are clearly identifiable as belonging to a customer.
“This would bring Victorian rules into the 21st century – providing clarity for business and better protection for consumers.”
It’s important that laws such as these ones are reviewed, and where necessary, updated to reflect changes in how users purchase products or services.