Voucher holders proposal to become 'preferred creditors'
"The concerns surrounding the treatment in insolvency of consumer deposits, including gift vouchers, are understandable. We certainly see merit in looking at the options for addressing these issues but it is vitally important, too, that the wider consequences of any potential change are fully considered.
“We are not convinced that proposals to move customers with gift vouchers further up the queue and class them as ‘preferred creditors’ is the right solution. By definition, in an insolvency, there is insufficient money to go round and what money remains is apportioned in an established order. Increasing the size of the ‘preferred’ category could in many cases wipe out the funds available for creditors further down the queue, which can include banks or other lenders. This could have huge impacts on the cost and availability of credit, at a time when businesses are already really struggling with these issues.
“However, no-one wants to see customers losing out, and one potential option could be an insurance bond to be taken out by each retailer wishing to sell vouchers or take deposits from consumers. This would prevent vouchers or deposits becoming worthless in an insolvency event. We consider that the cost of providing such an insurance policy should clearly be borne by the retailer and will justifiably be seen as a cost of allowing them the privilege to use monies, paid in advance by their customers, to fund their businesses.
“I have been talking to MPs about how to ensure a better deal for customers, while not upsetting the conditions that allow banks to lend in the first place. When a company enters administration, administrators have a statutory duty to act in the best interests of creditors as a whole, and at present are simply following the rules. In certain circumstances, administrators may take the commercial decision that accepting gift vouchers is in the best interest of creditors as a whole or that it maintains goodwill in the business he is trying to sell and will therefore honour them.”
R3 President Lee Manning