Protecting yourself from insolvent suppliers

Sponsored feature | Frank Brumby, of HCR Law, offers expert insight

Corporate insolvency rates are high, with just over 6,300 insolvencies for the three months to June 2023. Many of these businesses will be part of a supply chain, and not being able to meet commitments will be of concern for both those who face insolvency and those who rely on them.

Whilst the inflation rate is falling, costs are still increasing, and interest rates are still at risk of increasing as well - which will only continue to put financial pressure on businesses. For individuals and businesses of any size, the risk of a supplier failing to provide goods or services which have been paid for is a serious issue and could have a domino effect.

There are a number of ways in which you can protect yourselves from the insolvency of a supplier, or, at the least, mitigate the financial impact.

Warranties

Most goods are sold with a warranty, which is a contract between the customer and the retailer - the retailer is therefore your first port of call. If the retailer goes bust, it is extremely unlikely that it will fulfil its contractual obligations. If the goods you are buying are of significant value, it is worth checking if there is a manufacturer’s warranty in tandem and what that covers. Just remember that extended warranties are only of use if the person giving the warranty is still in existence when you call upon it!

Vouchers

Vouchers can be a good idea as a gift or might be offered as a refund. However, if not spent relatively quickly, and the supplier of the voucher goes bust, they are very unlikely to honour the terms laid out.

Credit cards

There is a simple way that you can protect yourself and that is to buy goods or services on your credit card and benefit from the statutory protection under section 75 under the Consumer Credit Act 1974. In a nutshell, it makes the credit card company jointly liable with the retailer or trader that you have purchased from. This means if there is a fault or problem with the goods or services, you can simply make a claim against the credit card company. It is worth noting:

- The protection extends to all foreign transactions or goods brought online, by telephone or mail which are for delivery to the UK from overseas

- The goods or services bought must be a minimum cost of £100 and maximum cost of £30,000

- The protection also works if you only pay a deposit to a retailer or trader, providing it is over £100 but less than £30,000 - if you happen to pay the rest by bank transfer you can claim the full amount of the transaction. For example, a deposit on a kitchen of £500 and balance of £4,000 by bank transfer means the entire costs of the kitchen would be covered

- There is no set time limit for you to make a claim against your credit card supplier

- It does not apply to purchases made on debit cards.

For more information, please contact Frank Brumby, partner, national chairman of restructuring & insolvency, restructuring and insolvency team, HCR Law. Call 0203 375 8316 or 07980 594 204 or email fbrumby@hcrlaw.com