What are my rights as a Consumer in Insolvency?

In recent weeks, over a million people have been affected by energy suppliers collapsing into insolvency, after the price of wholesale gas surged.  These rising costs are putting pressure on the suppliers, who cannot pass the increases onto customers. 

Amongst the firms which have already gone bust are, Avro Energy, Green, MoneyPlus Energy, People’s Energy, PFP Energy, and Utility Point.  Others such as Bulb and Igloo are also reported to be facing financial difficulty. 

What if my energy supplier goes bust?

If an energy supplier fails, Ofgem will ensure that the supply of gas and electricity continues, uninterrupted. Customers will be switched to a ‘supplier of last resort’ (“SOLR”) and any credit with the old supplier will be transferred.

You will usually receive a notification explaining what has happened and who your SOLR will be.  Once the process has completed, you can compare energy deals to see if you can save by switching to a different provider of your choice.

What about other goods and services?

Consumers often pay for goods or services before they receive them, most commonly when they are purchased online.  With more and more people shopping online, it is important that customers know their rights, and shop wisely to reduce the risk of losing money if the supplier later becomes insolvent. 

If the supplier becomes insolvent, before a customer receives the goods paid for, these will usually be retained and realised by the Insolvency Practitioner for the benefit of the insolvent business.  Customers who have pre-paid are then required to submit a claim in the insolvency process, and in the worst cases, the customer may not receive any of their money back.

Goods and services bought with credit

If a customer has used a credit card or point of sale loan to purchase goods or services, then the transaction could be covered by Section 75 of the Consumer Credit Act. This allows you to raise a claim against your credit provider if:

• you paid some (or all) of the cost by credit card or with a point of sale loan;
• the cash price of the goods or services is more than £100 but not more than £30,000.

Directors’ Responsibilities to Consumers

When a company becomes insolvent, the directors have various statutory duties.  A director can become personally liable in respect of company debts and should take practical steps to ensure that the position does not worsen. 

In relation to consumers, directors should ensure that payment (whether in full, or in part) is not taken if it is likely (or they know) that the company will be unable to provide the goods, or services.

How can Insolvency Practitioners such as Keywood Group help?

Keywood Group is a Licenced Insolvency Practice with offices in Birmingham and London and our team has extensive experience advising businesses on their options.  If your business receives prepayments from customers and you have concerns regarding its financial position then it is best to seek early advice.

Our friendly team will work with you to assess the options available and provide transparent advice about the implications of each option.  If you want further information, please contact us for a no obligation chat.