What are your rights if a shop goes bust?

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What happens if a high street shop goes goes into administration? With Debenhams having a pre-pack administration, and House of Fraser going into administration in 2018, it’s worth knowing your rights if a shop goes bust. Whether or not you’ll be able to get what you’ve ordered or your money back may depend on a number of factors.

Q. What are your rights if a shop goes bust?

A. First of all, it’s important to talk about what ‘going bust’ means.

  • Liquidation: If a shop goes into liquidation, it will normally close down very quickly. That’s going bust or failing.
  • Administration: If a shop goes into administration, it doesn’t necessarily mean the end of the road for the chain. However, it could affect your rights as a consumer. The shop will normally carry on trading while administrators look for a buyer. That means the shops will be open, although this may only last for a few weeks. If no buyer is found, shops will close.
  • Pre-pack administration: If a retailer goes into a pre-pack administration, it’s different because they’ve already lined up a buyer. Some shops will usually close but the chain should generally carry on trading as normal, at least while it finalises its turnaround plan.

SAVVY TIP: Most shops offer an exchange or refund policy if you’ve bought something that later turns out to be unsuitable. However, once a shop has gone into administration, there may be limits on whether or not they’ll let you exchange. For example, when BHS went into administration, you could exchange items you didn’t want for the same value or less as long as you had proof of purchase.

Administrators can decide whether or not they’ll accept gift vouchers. When shops have gone bust in the past the position has varied. In some cases, the administrators have taken gift vouchers for their full value, in others, only if they make up 50% of the purchase price or less.

Q. I’ve ordered something from a retailer and it’s collapsed. Will I get it?

A. Some shops will continue trading while the administrators try and find buyers. In that case, you may get the item you ordered if it was in the warehouse at the time  the shop went into administration. However, you may not get the item delivered. If a shop goes bust and the stores close straight away, you probably won’t get what you ordered.

Q. I’ve paid for something on my credit card and it’s not arrived. Can I claim against my bank?

A. If you’ve paid for something that costs more than £100 and less than £30,000 and you’ve used your credit card either to pay the deposit or to pay the full amount, you should be able to make a claim under section 75 of the Consumer Credit Act. This means you can claim your money back from the bank (or whoever issue the credit card) for a refund if the goods don’t arrive or the shop goes bust.

SAVVY TIP: The £100 lower price limit applies to each individual item, not the final total purchase price. So if, for example, you ordered a kettle and toaster that cost over £100 between them, you wouldn’t be covered under section 75. If you paid for a washing machine or sofa, for example, costing £350, you’d be able to claim.

Q. I’ve ordered something costing less than £100 and paid by credit card. Can I do anything?

A. If you’ve ordered and paid for something that costs less than £100 you may be able to ask your credit card issuer to do what’s called ‘chargeback’ (it’s essentially a reversal of the transaction). It’s not a legal right (like section 75 is) but it’s something that the credit card providers have signed up to. It also applies to debit card transactions. It’s useful to know about if you’ve ordered something costing less than £100 and the shop goes bust.

SAVVY TIP: You can get more information in my article that explains Getting a refund from your credit or debit card through chargeback.

Q. I’ve paid for something that I may not get. Can I just go to the store and take one?

A. No, although if the goods were identified as yours (they had your name on, for example) you may be able to claim them. Otherwise, if you didn’t pay by credit or debit card (when a chargeback might be able to be used) you would have to claim from the administrators. If a shop goes bust, you’d be in a queue with all the other creditors and would be unlikely to get all your money back.

Q. I’ve got some gift vouchers from a retailer. Will I be able to spend them?

A. It will depend on the retailer. Some shops will let you spend gift vouchers for a limited time as long as the stock is available. However, be warned — once administrators have been appointed they are unlikely to accept gift vouchers or give a refund for them. There is no hard and fast rule about what happens to gift vouchers if a company issuing them goes bust. It is normally down to the administrators to decide whether they will accept them for part of the value of the purchase price, the whole value or not at all.

SAVVY TIP: If you have gift vouchers that you can’t use, you may be able to make a claim against your credit card company (if you bought them by credit card) or debit card provider. There’s more information in my article about What happens if the retailer goes bust or your gift voucher expires?.

Q. I’ve bought something from a retailer and I have an extended warranty. Will I still be able to claim on it if there’s a problem?

A. Yes, you should be able to.  All retailers should give out information on their website and leaflets about what would happen to extended warranties if the retailer went bust. In most cases these will be provided by a third party provider which will not be linked to the retailer.

Q. I’ve bought an electrical item from a retailer that’s collapsed. Who do I take it back to if it stops working?

A If the retailer goes into administration, you probably won’t be able to take the item back to the shop to get a repair or refund. However, you’ll still be able to contact the manufacturer if it is under guarantee (or a manufacturer’s warranty). Some manufacturers will go the extra mile out of goodwill, so it’s definitely worth doing.

Q. I have insurance vouchers to use in a retailer that’s since gone bust, from a claim I made to my insurer. What will happen?

A. Insurers will replace unused vouchers from the retailer (as long as they have not expired. Contact your insurer to arrange an alternative. Some insurers say they actively contact customers who’ve not yet used their vouchers, but who have been given them as part of a claim, others wait for customers to get in touch.

Related articles:

Understanding your rights under section 75 if you pay by credit card

Your rights if you’re shopping for clothes in the sales – what to do if there’s a problem

How to complain to the Financial Ombudsman Service

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