Proposed new legislation will protect consumers who pre-pay for goods should the vendor become insolvent, it has been revealed.
Under current rules, known as “transfer of ownership”, goods paid for but not handed over at the point of sale may still be considered an asset of the insolvent company and could be used to pay the firm’s debts.
But the Government said it has asked the Law Commission to “set out new ways of identifying the consumer as the legal owner”.
This includes listing events and circumstances which would be sufficient to transfer ownership to the consumer, such as goods having been manufactured to the consumer’s own specification or online shopping where goods are not immediately handed over at the point of sale.
Other scenarios include where the goods have been set aside for the consumer in a way that is intended to be permanent and where the goods are delivered to a courier for delivery to the consumer.
The new rules will not benefit a customer if the item they purchased has not yet been made, however.
Commenting on the proposed changes, Consumer Affairs Minister Paul Scully said: “With more and more people prepaying for goods online, it is so important our laws are up to date to reduce the risk of customers losing out if a business unfortunately becomes insolvent.
“This consultation will look at how the law can be brought into the 21st century, providing clarity for those managing insolvencies and better protection for consumers.”
Law Commissioner Sarah Green added: “The current transfer of ownership rules are shrouded in complex language which consumers can find difficult to understand.
“We believe it is time for the rules to be modernised so that consumers have clarity on their rights of ownership, especially in an insolvency situation.”
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