Consumers in the insolvency queue

The Law Commission has set out proposals for greater consumer protection when a retailer goes bust.

The Commission examined 20 well-known high street insolvencies occurring between 2008 and 2014, as well as a number of smaller retailers.

Writing in NLJ this week, Stephen Lewis, Laura Burgoyne & Conor McLaughlin of the Law Commission explain they decided against the calls of some consumer bodies for all consumers to be paid in priority to other creditors as not practical or proportionate. This was because of the other interests involved, including employees, secured creditors and other unsecured creditors such as suppliers and self-employed contractors.

Instead, they suggest that there may be a case for a “limited preferential category of consumer claims where more than £100 has been paid in the three months leading up to insolvency, and where no other protections are available”.

This “would benefit consumers who part with significant sums in cash or by cheque,” they write.