Government to draw up legislation to protect consumers during insolvencies
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The government will bring forward legislation to protect consumers when retailers go insolvent, with the UK’s Law Commission slated to draw up the new laws.
Under existing legislation, any goods that have been pre-bought by consumers, but not yet collected, are counted as assets if a company becomes insolvent.
They can then be held by administrators and sold off in order to repay company debts, meaning consumers who bought the goods are left empty handed.
The Department of Business, Energy and Industrial Strategy (BEIS) announced today that it has asked the Law Commission to “draft legislation to update the law that establishes when consumers legally own goods for which they have pre-paid”.
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Consumer affairs minister Paul Scully said: “With more and more people prepaying for goods online, it is so important our laws are up to date to reduce the risk of customers losing out if a business unfortunately becomes insolvent.
“This consultation will look at how the law can be brought into the 21st century, providing clarity for those managing insolvencies and better protection for consumers.”
Law Commissioner professor Sarah Green said the current laws are “shrouded in complex language which consumers can find difficult to understand”.
“We believe it is time for the rules to be modernised so that consumers have clarity on their rights of ownership, especially in an insolvency situation,” she said.