Why didnt all those people using the now bankrupt Farepak - and lost their money - use a high int savings acc?

Question

As I’m sure many have heard, there are hundreds of people around the country who have unfortunately lost all of their money, which they saved with a company called Farepak, which went bankrupt. Farepak was holding their money so that these people had money for Christmas presents.

The thing is, what exactly did Farepak do when it was still operating?? Did it invest peoples money? Did it offer interest?

Why didn’t the people using Farepak instead open a high interest savings account, which fully insures your money (pluis gives you interest)?

If this is the case (and if Farepak did not give interest) then are the people partly to blame for being idiots with their money, or have I missed the point?

Comments and suggestions??

First and foremost I do feel for these people and would not wish such a thing even on my enemies.

Anyway - so we are assuming that Farepak would not allow you to withdraw the money, even if you wanted?

And this sis the principle argument as to why these people would not want a bank account – because they would draw all of the money out??

Also, you do NOT need a good credit rating to open a savings account. A credit rating is used to get CREDIT, not to open bank accounts. Only a bankruptcy would cause difficulties opening a bank account, so I still cannot understand it.

And I am sorry, but it takes absolutely NO financial acumen whatsoever to walk into your nearest bank and enquire about a savings account. Jees – unless these people had learning disabilities, how would you NOT know about savings accounts? Fair enough it might take a small amount of research to find the best, but most high street banks offer 1-3% as standard…

That is another thing I cannot understand. Yes, this is a horrible situation and people could have ruined Christmas’s, but why should the government and other companies get involved because these people have lost their money?? What about all the other people who lost money to door-to-door conmen or the like?? What about identity theft? Is this situation worse than that?

I think it is time (esp. now that even the government has got involved) for any of these companies to be FULLY regulated by the FSA, not least with them handling and holding large sums of other peoples money.

Fair enough, some good points and coem have certainly made me think of things i wouldnt have thought of.

I hope there is some justice for these people, but still think these companies need regulating in some way to stop such a large and gratuitious loss of money ever happening again.

Answer 1

I dont think your being insensitive at all, I think its a fair question.

Even for people who have a poor credit rating as such and cant get credit, they could still get a basic savings account with any bank or building society.

I think its a terrible thing to happen to all those people, but i agree with you. Why not just put a few quid a week into a savings account.

What possible benefits does saving with these types of companies give??

Answer 2

This saving system is a throwback to the old style "Christmas Clubs"that were operated by local shops in the days before most working people had bank accounts.
I really don't understand why in this day and age ,anyone would want to lodge their money with an outfit like Farepak when there are Building Societies and Credit Unions available which pay interest on savings.
And why should Farepak customers be considered any more favourably than any other folk who lose money to companies that go bust?

Answer 3

People liked the informal way of paying
People liked being locked into a savings plan till Xmas
People liked the friendly local feeling, see below about Agents
People liked their Agent getting a bit of commission - haven't you noticed how the Agents were all relatives or close friends of their customers?

Banks etc are not going to do all of the above. However, credit unions can and do offer the infromal friendly set up, with the difference that they are safe and regulated by the FSA. JUST LIKE BANKS. so the answer is not to switch to a pub savers club or another hamper company as I have seen many Farepak customers state - out of the frying pan into the fire ! The answer is to ask their local credit union for a Xmas club that locks the money away all year, try Yellow Pages under 'credit union' or phone [phone]

Answer 4

Invest in a bank and it has to repay you in money. A hamper company, by contrast, repays you in clearly defined Christmas stuff - of which it buys a great deal. It could hence use its purchasing power to buy smoked salmon (say) at a far lower price than an individual Farepak member could. Hence Farepak in theory could benefit the member twice - first by investing the money well and then by spending it well. In this case that clearly did not happen. With such clubs there is also the issue of self-restraint - in that the money put aside for Christmas cannot be squandered in the meantime - though it seems odd that people with the discipline to save £100s per month don't have the discipline to use a savings account. Having said that, it may not be the savers themselves who lack self-restraint, but a family member with a drink or gambling problem, say.

Answer 5

They save with companies like Farepak because they know they will be able to buy all the things they need for Christmas. If they just put the money in the bank, then if an unexpected bill came or they fancied a holiday the money would be taken out. Also a lot of these people are on benefits or on very low wages. If they put the money into a savings account for Christmas, the social would view this as savings and they could suffer a reduction in their entitlement. Its a mockery, because if they smoked and drank the money they get the full entitlement, if they save it they get penalised.

Answer 6

I lost £960 with Farepak and i work and so does my husband.
We have no debts and no credit cards.
If we had put the money into a bank we both know that the temptation would be there constantly to take it back out.
We took out vouchers with Farepak last year and decided to do the same this year to help with getting gifts for my two children.
There's nothing wrong with what we have done and to put people down for doing so and not using a bank is very childish.
If that's the case why don't you have a moan at people who use credit cards and catalogues.
People who were saving with Farepak did not have to get into debt to do so,ie credit cards,loans and catalogues.
What we payed in is what we got back,so wheres the harm in that?

Answer 7

The reason that people use hamper schemes instead of putting the money in an account is this:

If you really fancy re-decorating your bathroom or something half way through the year you will take that money out of the account an use it. You will mean to replace but will never get round to it and come Christmas there will be nothing in the account.

If you are giving it to a rep (usually a family member or friend) then they are not going to give it back to you until Christmas and then only in the form of vouchers to use for Christmas presents. if you are on a tight budget it would be easier to do this and I can totaly see it.

It is the same as those saving stamps that you get at supermarkets, it's easier to put a little by each week rather than trying to run an account.

Answer 8

what i dont understand is, why are other companies now being slated for not helping the victims of farepak?, they are not the ones who caused this and so why should they foot the bill.
another thing i dont get is, tesco provide stamp saving schemes that you can save all year, for £1 each, even if you spent £4 a week on them you would have a very nice amount to spend at xmas, and surely they were paying more than that a week, considering most have lost at least £1000. also i have always farepack etc, are quite a rip off, you pay £50 for a basket of food of which half wont be eaten because you cant choose whats in it, and you could probably get the same stuff in the basket in tesco or another superstore for half the price!!!!

Answer 9

I understand your question as I wondered it myself. Asking around, the following things came up, some of which have been mentioned already:

* You can't touch the money. Most low money savings accounts are instant access
* Whatever you may say, some people ARE still refused bank accounts (I used to work in a bank, it happened more often than I would have thought)
* A savings account wouldn't give much interest - you need to invest £000's to get decent interest
* One of my friends said you get vouchers to spend in certain shops worth more than you paid in - not sure about this at all though as it seems that shops would lose money!!
* It is a throwback, as someone said, to the old Christmas clubs. You can take it even further back than that to Victorian times, and perhaps before, with benevolent funds etc and people saving a penny a week for their Christmas goose otherwise they wouldn't have one at Christmas.
* So, in some families, it's tradition. That's what they've always done.

Moreover, as this sort of thing hasn't really happened before, I don't think it would occur to anyone that they wouldn't get their money back.

Answer 10

The majority of the people who open Christmas Club type savings accounts are of poor credit rating and therefore unable to access 'normal' bank services.

You have to feel for the people who lost everything with Farepak.

You also have to question the activities of Farepak who still took regular monthly or weekly 'savings' from people whilst knowingly trading as technically insolvent.. A case for more closer scrutiny by investors being allowed by such companies.