The collapse of Christmas saving scheme Farepak highlights a “serious lack” of consumer protection, MPs have said.
A Treasury Select Committee report urged government action to ensure such situations do not happen in future.
MPs want more powers for watchdogs such as the Financial Services Authority (FSA) and Office of Fair Trading (OFT) to safeguard people’s money.
About 150,000 people are estimated to have lost a total of up to 50m when Farepak collapsed in October.
So far the Farepak response fund launched by the government has raised 5.8m from companies and individuals - about 10% of the money lost.
Launching the committee’s report on financial exclusion, its chairman John McFall said it was vital to give people association of finance and insurance professional
that their savings would be protected.
Action needed
He said money paid into schemes like Farepak should be as safe as that deposited into a bank.
“The Farepak case has business finance insurance
a serious lack of consumer protection in this area,” he said.
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John McFall
Treasury Select Committee
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“I want to see early action from the government, the OFT and the FSA to consider how appropriate safeguards can be introduced to ensure that such a situation never happens again.”
The report says the Farepak case highlights the need for the government to extend its policies on financial exclusion to the areas of savings and insurance.
The committee said it wanted to see evidence of “substantial progress” on consumer protection by the end of January.
‘Complex decisions’
The report also wants more action from the government on educating people about other areas of personal finance, such as debt.
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FAREPAK HELP
0870 066 9826
www.farepakresponsefund.org.uk
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“There is a need for dramatic improvement if we are to adequately equip young people for the complex financial decisions they will face,” said Mr McFall.
Teresa Perchard, director of policy at Citizens Advice, welcomed the committee addressing the Farepak issue.
“This scandal has forced thousands of families into difficult financial auto finance insurance
through no fault of their own and cannot be allowed to happen again,” she said.
The FSA had no powers to regulate Farepak so when the firm went under, savers’ money was not estate finance hill in insurance investment irwin mcgraw real series, he added.
A rescue fund has raised more than 5m for the victims of the Farepak collapse but one of those affected told the BBC that proper safeguards were needed for savers.
“I never thought companies like Farepak could lose all of our money in this way,” said Florence Woods, who paid 500 to the company.
“I thought it was protected.”
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