What to do when a company collapses
How you pay for goods will often determine whether you get your purchases when a company goes under.
What happens when a company's in trouble?
With Aussie mobile retailer Allphones going into voluntary administration, customers who've shopped there recently and want to return goods for a refund – or who have bought items on layby – will not be high priority.
But as receivers focus on recouping outstanding debt for the company's creditors, shoppers do have some rights.
A similar situation arose in 2010 when electrical and whitegoods retailer Clive Peeters was believed to owe a total of about $70m to approximately 1500 secured and unsecured creditors.
And more recently Dick Smith customer were left in the lurch. So what did all this mean for those customers who hadn't yet laid hands on what they'd paid for?
When a company goes into voluntary administration it appoints an external administrator to help plan what steps need to be taken. If nothing can be done for the company, the administrators will try to get the best outcomes for the people or groups to whom it owes money – the creditors.
If you've paid for goods that you haven't yet received and the company goes under, the way you paid for the goods has big implications for whether or not you may get your money back.
It's important to be aware of some basic ways to safeguard your interests if a company you've bought goods from goes under.
Buy with a credit or debit card
Customers who buy goods with a credit card, or certain debit cards, are generally better protected than those who pay by cash. If you have used a credit card to pay for goods in full and haven't received them, you may have a case for chargeback.
On behalf of the customer, the card issuer will seek a refund from the bank of the folded company. The right of chargeback also applies to debit card customers who chose the "credit" option at the time of purchase.
While paying on EFTPOS may reduce or eliminate any fees you pay, it can compromise your safety net if the retailer you have purchased from goes under.
Time limits for chargeback apply and vary between financial institutions, so it's important to contact your bank or credit union as soon as possible.
- National Australia Bank requires cardholders to notify the bank of chargeback circumstances no later than the due date shown on the statement of account.
- Teachers Credit Union Visa cardholders should contact the credit union within 45 days of the transaction.
- American Express cardholders should call Amex on the phone number on the back of their card no later than 120 days from the transaction date or expected date of receipt of goods. All chargebacks are considered on a case-by-case basis.
- MasterCard holders should contact their card issuer within 120 days of when the transaction was debited to the account.
- Visa cardholders have 120 days to initiate a chargeback and are advised to contact their card issuer as soon as possible.
- Diners Club cardholders should call customer service on 1300 360 060 and dispute the charge within two months of when the transaction was debited to the account.
What if I paid with cash or a "cheque" or "savings" card?
The only option available to customers who paid with cash or a cheque, or who used a debit card and chose either the "cheque" or "savings" option at time of purchase, is to wait for the outcome of the administration process.
What if I have unused gift cards or credit notes, or I have products on lay-by?
If you have unused gift cards or credit notes, or are paying off products through a lay-by agreement or an interest-free deal, you are an "unsecured creditor" and must register your details and wait for the outcome of the administration process.
In the Dick Smith case, consumers who bought gift cards before the collapse – and plenty apparently did – had another option: both Coles and Woolworths agreed to exchange Dick Smith cards purchased at their stores with a Coles or Woolies gift card of equal value.
Gift cards were also exchangeable at Big W (owned by Woolies), but Coles limited the offer to Coles supermarkets and left out other Wesfarmers stores, which include Bunnings, Kmart and Target.Allphones customers do not appear to have such options.
What about my warranty?
You may be able to claim warranty on products bought after the business goes under, provided it's from the manufacturer.
How do I claim my money back?
Consumers are generally treated as unsecured creditors – which means you'll only be paid once employees and secured creditors have been repaid. In order to get your money back you'll need to register with the external administrator as a creditor.
You can do this by completing a "proof of debt" form, which can be obtained from the voluntary administrator. This is usually done to notify the voluntary administrator of your claim and enable you to vote at creditor meetings.
The insolvency process will determine whether you either receive the goods you've paid for, a full or partial refund or potentially nothing.
Go to the ASIC website for general information about insolvency.