Treatment of banks and Farepak

IT SEEMS incredible, given the amount of money that has been thrown at a profligate and greedy banking system over the last couple of years, that the Christmas savings club Farepak was ever allowed to go under for the sake of a mere £42million.

To customers, there was little difference between high-street institutions like Northern Rock and the Royal Bank of Scotland and Farepak. They deposited money in a savings account and expected to be reunited with it when they wanted it or by a specific date. Regulation or not, they believed their money was safe.

The subsequent bailout of the high-street banking sector has been a kick in the teeth for Farepak savers, who have long campaigned for government help to recover their savings.

Now it has emerged that Farepak customers are to get 15p for every pound they lost instead of an original deal of 5p. The increase in repayments is to be welcomed, but it is still short of the total protection that banking customers have been enjoying.

A government report compiled in 2007 into the collapse of Farepak has never been published. There also appears to have been little suffering by the directors of Farepak and no attempt by them to explain publicly how their company folded under the noses of tens of thousands of savers.

Whoever forms the next government will have much work to do to rebuild and re-regulate the financial services industry. They should ensure that Farepak and similar savings clubs are included in any reshaped industry in the future.