The humble consumer may have very limited rights, but it is not necessarily a lost cause, writes CAROLINE MADDEN

AS THE credit crunch continues to bite, retail outlets seem to be falling like dominoes. In January, Land of Leather announced it was to close 33 of its 109 stores (including four Irish stores), while shoe retailers Barratts and Priceless Shoes went into administration.

Troubled music chain Zavvi is to close its Kilkenny and Arklow outlets, and last week Irish retailer Classic Furniture went into receivership, shutting its Sligo and Navan shops. What happens to consumers caught in the crossfire of these closures?

The bad news is that consumers have very limited rights if a retailer ultimately goes out of business. Unfortunately there is a very strong possibility that consumers who have put down deposits, or have bought goods and are waiting for them to be delivered, won’t see their money or their goods again.

Catherine Lenihan, assistant director of the National Consumer Agency (NCA), explains that when a company goes into liquidation it usually owes money to a number of creditors, and consumers are low in the pecking order. Priority is given to “secured creditors” such as banks, and to “preferential creditors” such as the Revenue Commissioners.

As an “unsecured creditor” the humble consumer must join the back of the queue behind the priority creditors, and hope that there is enough left in the pot of liquidated assets to reimburse them.

If they are to get anything at all, consumers must first prove what amount is owed to them by the company, so they should put their claim in writing to the liquidator. However, according to the NCA, in the majority of cases unsecured creditors receive little or none of the money owed to them.

It is not necessarily a lost cause, however. If the business that has gone into liquidation is a subsidiary of a larger company, it may be possible to make a claim directly to the parent company. And if you made the purchase using a credit or debit card, Lenihan recommends contacting your card issuer as they may be able to cancel the payment.

According to the NCA, if a company goes into examinership and continues to trade, its customers may still receive goods and services that they have ordered, but unless a solution to its financial problems are found, the company could end up in liquidation.

Land of Leather has gone into administration (the UK version of examinership). Its administrators, Lee Manning and Nick Edwards of Deloitte, have said they intend to honour all orders and have outlined how different categories of customers will be affected on

www.landofleather.ie.

Customers can contact a helpline on 0044-0800-4960868 for more information.

If a company goes into receivership, the consumer’s position is similar to that in an examinership. Kieran Wallace of KPMG has been appointed as receiver to Classic Furniture and, according to reports, is working with the company to ensure that all customer deposits are honoured. Customers who paid by credit card should contact their card provider and try to get a refund of their payment.

One area where large upfront deposits have traditionally been required is in the wedding industry. It is not unusual for couples to pay several thousand euro to a hotel up to two years in advance of their big day. This obviously has its perils.

Firstly, the couple’s financial situation could deteriorate in the meantime, forcing them to scale back their nuptial celebrations. Their entitlement to a refund would depend on the terms and conditions of the agreement in place, Lenihan says, but a hotel would probably be well within its rights to refuse to hand back the deposit.

The other risk is that the hotel could shut down. Many people who had booked weddings and other events in Limerick’s Castletroy Park Hotel were understandably distressed when the hotel recently announced that it was closing its doors because of “insurmountable trading difficulties”.

Fortunately the Carlton Group stepped into the breach, took over the hotel (which is to reopen) and confirmed that all deposits taken for events in the hotel will be honoured.

Lenihan points out that hotels will be very keen for business now, so couples should try to limit their exposure by offering a “holding figure” rather than a large deposit as a “declaration of intent”, and possibly agree to pay another sum closer to the date of the event.