FairPack Collapse and Charity fund.

[ikonia]

Topical post but the news this morning inspired me.

Fairpack the "christmas saving" company has gone bust and left many families out in the cold in terms of Christmas savings (old news I know).

The news this morning reported a charity fund had been set covering 4.9 million pounds which had been donated by retailers. There is still a shortfall of 40 million.

The chairman of the charity was urging other high street retails and banks to dig into their pockets and up the fund.

Now the debate -

Should this be a charitable fund ? a business has gone bust - terrible, but isn't that part of the gamble of investing in these companies ?

The chairman of the charity stated that this fund was to only go to people who had lost out in fair pack savings - what about the people who have lost their job just before Christmas with the fair pack collapse ?

The chairman of the charity attempted to guilt other retails (HMV, Homebase etc) into donating money as it is "these companies that will miss out on business". Do you believe companies should be donating (remove aside the marketing appeal of donating) - if they donate say for example £10 per head and that customer spends £10 per head in their shop - then they have effectivly given away their goods. Or if a shop donates £10 per head and a customer spends £20 in their shop then that £10 coupled with a rivals £10 will have been used to fund a rival businesses trade in the christmas boom ?

If this charitable fund is being setup for this business collapse - what sets it apart from other businesses cloapsing ?

Rover - was their a fund for this (I think there was something)
Insurance Companies: I know of two gone bust leaving claims unpayable and a college of mine without an £18k car
Dodgy law and loan firms - they seem to sping up and dissapear over night - are people out of pocket in this situtaion - whats the difference ?

Hot topic and sad for the people left in the cold -

Discuss and debate.

[robbo]

you cannot buck the market.

[Sinizter]

Sad for the people left out in the cold ... but it was a business and it went bust. Why the damn hell is it a charity ?

[kickstart 1]

Dont think it would have attracted so much attention ,only for the fact these people were saving for christmas.

[ikonia]

This was part of the debate,

why should people be asked to donate their money that they chose to save in other ways ?

Why should companies be asked to donate money ?

Is this wrong/right ?


As mentioned if this wasn't a christmas offer for people with small incomes it wouldn't get the same profile, but not fully understanding all the process of fairpack - I could be wrong on this next point.

Isn't the saving a bit like a shares/gamble process where money is saved with fair pack so they make money from the savings by either interest/investment of the customers money (thats not fact thats just how it was presented on the news this morning)

Why didn't these people save in a bank - ok they can't get bank accounts, save under their bed ? there must be a "risk" or "pro" to saving with fair pack otherwise people won't do it

[nichomach]

Then don't donate. No-one's forcing you. Savings schemes like this are predominantly sold to people on lower incomes as a way to prudently budget for Christmas, putting by a bit each week or month so that they can afford a good Christmas without getting into large amounts of credit/store card debt. In that sense, they were encouraged to treat this company in the same way as a bank or building society savings account, and they probably thought that their money was safe (as it should have been). They are distinct from employees, since employees at worst will receive state benefits. It's horrible for them, but there IS a safety net there.

Ikonia refers to the "gamble" of investing in these companies; would he regard putting money in an ISA as a gamble? Or a deposit account? Or a NS savings account? These people weren't sold a gamble as someone investing in stocks and shares or property might be; they were sold a savings scheme, a place to put money by SAFELY for Christmas. They've been betrayed by the company who misused their money, and by the lack of appropriate regulation of schemes like this, which should LONG before now have been made the subject of regulation by the FSA. I think viewing them as "gamblers" is frankly ludicrous; these were people who thought they were being careful and are now being punished for that by corrupt and incompetent directors and a woefully inadequate regulatory régime.

As far as approaching companies to donate, the head of the charity's doing what the head of any charity would - attempting to reel in corporate donations.

Ikonia: In the examples that you give:

Rover: Tragic, but the employees at the very least have state benefits. Horrible, but they will receive government help.
Insurance companies: There's a difference between tiers, if you like. A lot of insurance companies that you see advertised...aren't. They're effectively resellers for larger organizations (as in the case of say, esure or Diamond, or Sheila's Wheels). In that case, their debts should be underwritten by the company ACTUALLY selling the insurance. Loan companies are the same; they actually front for larger financial institutions - although in that case, it's more the case that you'll still owe them for the money that you've already received. Lawyers carry professional insurance also.

In this case, Farepak was allowed to essentially offer a financial service - a savings scheme - with absolutely NO regulation or indemnity. That's pretty scandalous.

[ikonia]

great points nichomach,

just to clarify - I'm not calling people gamblers, nor am I saying the people investing where right/wrong, I'm just discussing the pro's/con's and rights and wrongs of the situation. I feel very dissapointed for the people losing out.

Your point about treating fairpack as a bank is interesting, if its treated as a bank eg: you put £10 into it - you get £10 back at the end of the year, then what would be the point, other than budget control which you could actually do with a bank. The reason I suggested that using fair pack was a gamble was how it was presented on the news this morning in that fairpack get X ammount of customers to invest and then invest that money for 1 year (or whatever their actual investment terms are) and the return the customer gets depends on how long they have been paying in and the ammount they have paid in (as I suppose this effects the ammount and duration of money fairpack has to invest)

I totally take the point on the distinction between customer and employee, thats a fair distinction, if I could return to rover (another high profile gone bust) wasn't there a problem with customer whos had ordered cars not getting them at call it 8K per car wouldn't this seem like a more significant loss per person ? yet the fund was to help sell the company not compensate customers (judging by what I've read on the internet as this is a slightly old example).

The point on insurers is valid, the parent company should absorb it, but as I understand it don't as they are seperate companies, and going by the example of my friend who lost his 18k car because they couldn't afford to pay out after a 3rd party wrote of his car in an accident. But to be fair I don't know all the exact details other than the company supposed to be paying went bust and couldn't cover the cost of the car, and his insurance where reluctent to pay as the fault had been laid at the 3rd party's door.

You make a VERY valid point about the lack of regulation, I think this every time I see the Ocean Finance or "Loans 4 U" adverts on the TV with happy sell outs Vordaman and Smiley selling their souls to these leaches to con the under waged out of what little they have.

Great response and just the debate I was looking for.

[nichomach]

great points nichomach, just to clarify - I'm not calling people gamblers, nor am I saying the people investing where write wrong, I'm just discussing the pro's/con's and rights and wrongs of the situation. I feel very dissapointed for the people losing out.

Sorry, I misunderstood; I'll admit that I was rather lathered about regarding people like the victims of this collapse as gamblers .

Your point about treating fairpack as a bank is interesting, if its treated as a bank eg: you put £10 into it - you get £10 back at the end of the year, then what would be the point, other than budget control which you could actually do with a bank.

Well, most banks would pay interest on savings, wouldn't they, so you'd expect to get more back than you'd put in, or I reckon that you'd pretty swiftly change banks . That said, you would expect your principal to still be safe, correct? That whatever happened you would still get your £10 back.
A lot of the people who use schemes like this have no or very limited access to conventional financial services, so can't use conventional savings schemes, or they just assumed that since they were SAVING their money, that it would be safe. It's not an unreasonable assumption - you or I might regard a conventional financial service as better, but people being sold these schemes aren't necessarily going to know that there's a difference, or may have no other option.

The reason I suggested that using...

So essentially the same as regularly paying into a savings account. Which I think we would both regard as a better option, but which may not always be available.

I totally take the point on the distinction between customer and employee, thats a fair distinction, if I could return to rover (another high profile gone bust) wasn't there a problem with customer whos had ordered cars not getting them at call it 8K per car wouldn't this seem like a more significant loss per person ?

It would be, and I disagree with the way that unsecured creditors are treated. That said, most people buy new cars on finance terms; you don't get the car, stop the payments.

yet the fund was to help sell the company not compensate customers (judging by what I've read on the internet as this is a slightly old example).

That was a government established rescue fund to try to keep Rover as a going concern - it involved retraining packages, sweeteners to make it a more attractive purchase, etc.

The point on insurers is valid, the parent company should absorb it, but as I understand it don't as they are seperate companies, and going by the example of my friend who lost his 18k car because they couldn't afford to pay out after a 3rd party wrote of his car in an accident.

I'd want to know who the insurer was, TBH, since that simply shouldn't happen.

But to be fair I don't know all the exact details other than the company supposed to be paying went bust and couldn't cover the cost of the car, and his insurance where reluctent to pay as the fault had been laid at the 3rd party's door.

HIS insurer should have paid and then reclaimed the cost from the other insurer; sorry, but it sounds to me as though his own insurers were being arsey, and there is NO way he should not have got his car paid for. It's HIS insurers' responsibility to pay. At this point I'd be wording a formal complaint.

You make a VERY valid point about the lack of regulation, I think this every time I see the Ocean Finance or "Loans 4 U" adverts on the TV with happy sell outs Vordaman and Smiley selling their souls to these leaches to con the under waged out of what little they have.

I think the problem is that those companies DO do exactly what they say - at punitive interest rates, certainly, and don't even get me started on IVAs, but they are regulated by the FSA. I hate the ads, but they do state their interest rates and repayment periods. I agree on the underwaged part; it's simply another example of how the poor either can't get or pay through the nose for, the goods and services we take for granted.

Great response and just the debate I was looking for.

Thanks; likewise .

[badass]

Having been involved in a discussion in this before, I personally think that charity is the right way to treat this. It must be voulantary, and i believe that in many cases, people that have lost money through this deserve some charity.
These nobber MP's demanding the Gov't pay for the shortfalls can shove their demands up their arses, however

[capt_cornflake]

There isn't really any 100% guaranteed safe way of saving money really though, is there? Although it's highly unlikely it's perfectly possible that a high street bank could go under leaving people out of pocket. Better regulation would probably help minimise the impact of future things like this, but it's never going to completely prevent it from happening.

I was always under the impression that the only reason people use companies like this is nothing to do with access to savings accounts, and is just being used as another stick to beat the banks (Sticking up for the banks - what am I doing...?).
The people using these accounts know that if they put the money in a savings account, under the mattress, or wherever, that there is a pretty good chance they will end up spending it on something well before Christmas (whether it's due to lack of willpower or whatever). By locking their cash away in a scheme like this it kind of protects them from themselves (all be it at a rather high cost)

While I've got nothing against anyone setting up a charity, I really don't think the government should be funding it. And the whole blackmail the shops into paying up argument seems to be crazy talk as far as I can see - "You've already lost out once because of this fiasco, fancy increasing the amount you've lost out on".

If anyone feels like chipping in a few quid, then good on you, but I won't be joining in.

[ikonia]

very interesting responses.

This was again on the news this morning, this time it was a little more "drumming up business" for the "charity". More companies being shamed by not donating, which I didn't think sporting.

Here is an interesting thought - just prompt a slightly more agreesive debate.

The current fund stands at 5million, and the short fall is 39million.

the target being 44million.

This fund is to help people with low incoming buy turkeys/decorations/presents - now this IS a very hard line, but only intended to provoke debate.

5million in cash so kids can have presents - or 5 million in cash so homeless people can eat/sleep on christmas week ?

What if the target of 44million is raise (very doubtful) but is is right that every one who chose to "gamble" using fair trade get all their money back or should 44 million be spent on "better" causes, such as people who don't have the option to save for presents

again to be clear - not a personal view, an option to provoke debate.

[mr-nick]

I understand the reasons why these types of saving schemes are attractive to some (not to mention their agent / friend's % commision on every deposit) but don't the big supermarkets offer saving stamps anymore?

[badass]

very interesting responses.

This was again on the news this morning, this time it was a little more "drumming up business" for the "charity". More companies being shamed by not donating, which I didn't think sporting.

Here is an interesting thought - just prompt a slightly more agreesive debate.

The current fund stands at 5million, and the short fall is 39million.

the target being 44million.

This fund is to help people with low incoming buy turkeys/decorations/presents - now this IS a very hard line, but only intended to provoke debate.

5million in cash so kids can have presents - or 5 million in cash so homeless people can eat/sleep on christmas week ?

What if the target of 44million is raise (very doubtful) but is is right that every one who chose to "gamble" using fair trade get all their money back or should 44 million be spent on "better" causes, such as people who don't have the option to save for presents

again to be clear - not a personal view, an option to provoke debate.

In my mind thats pretty simple. They are collecting money for that specific purpose. That is the will of the donators so that is what is should be spent on, ma matter what anyones elses opinions on more worthy causes are.
Its either that or ban donating to any specific charity, anyone that wants to donate has to donate to a central pot that everyone, including the non donators gets to vote on!

[manwithnoname]

I'll ignore the charity question, good look to the customers of Fairpack if they see any money from any source.

I'll repeat the point about Fairpack 'banking' customer’s money, but not held to account by the banking regulations.

Main point where has the money gone, not too sure about company regulation, but I'm sure Fairpack must have had audited accounts as ‘I assume the TAX man wants his cut’ and need to verify he has all his cut.

So what happened when the auditors were round last?
-Fairpack accounts were fine and they lost all their money recently?
-Fairpack had money missing, but they glossed over it?
-Fairpack had money missing, but they didn't notice?

It appears 40million pounds is missing, can the auditors be liable for any of this if they 'cooked the books' or even worst didn't notice any of the money was missing?

Changed my mind about the charity question, the auditors should at the least give what ever they charged to the fund.

[TheAnimus]

If I understand the scheme correctly, they got vouchers from high street firms, which no doubt the highstreet firms where helping with offering a discount, and as such giving legitimacy to the company.

As such most of those companys should give too the charity as, no offense, but schemes like this will of been for people who can't work regular savings accounts which could offer much better return, the companies who helped sell fairpack, should know better, ie who is underwriting the insurance.

[herulach]

If people want to donate to a charity let them, its their money, as for the retailers, theyve probablly already set aside provisions for the discount they were going to give on vouchers, so that may be a way for them to donate, but it certainly shouldnt be obligatory.

Has anyone seen any details of how they lost the money? where the directors paying themselves huge dividends or something?

It certainly leaves a niche in the market for banks though, although most employers now offer a similar scheme too, well, everywhere ive worked has, and i think you get tax relief on it.