Legal action over Farepak scandal still up in the air

The government has completed its investigation into the collapse of Farepak, but victims of the scandal are still in the dark over whether any legal action will be taken against the firm.

The collapse of Farepak in October 2006 left 122,000 families £40 million out of pocket. The firm acted as a savings vehicle, collecting money on a monthly basis from families who were then issued with vouchers for several high street shops.

The government launched an investigation into Farepak amid claims that customer money was used by Farepak’s parent, European Home Retail, to prop up its own finances. By the time of its collapse, Farepak had loaned £17 million to its parent and sister companies.

The investigation is now complete and the government says it is considering whether legal action is warranted.

Gareth Thomas, consumer affairs minister, says: "The collapse of Farepak was dreadful for the thousands of people who lost money.

"The government is working hard to prevent other families suffering similar problems in the future. We initiated a comprehensive investigation to establish the facts. We are now getting legal advice on whether there are grounds for further action."

He adds that the government may also introduce new regulation to protect consumers and prevent another collapse of this sort of saving scheme.

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