MSE News: Hbos blamed for Farepak failure

Former_MSE_Helen

"A companies watchdog has abandoned a bid to penalise directors of the Christmas savings business..."

Read the full story:
Hbos blamed for Farepak failure

callum9999

Surely all banks are to blame then? Why should HBOS be responsible for providing extra funding just because they provided the initial funding?

Though ethically of course, they really should be putting more into the compensation fund. Particularly as they have been bailed out themselves now!

Uncle_Ben

Isn't it funny how the bank is always the villain?

It wasn't HBOS who rinsed those customers.

oldvicar

AIUI, HBOS might have ruined many a good business by pulling in all the liquidity it could and not granting businesses normal sensible lines of credit whilst (unsucessfully) fighting for its own life. Possibly they saw the writing on the wall as far back as 2006 and Farepack was just one of its first victims.

DVardysShadow

callum9999 wrote: »

Why should HBOS be responsible for providing extra funding just because they provided the initial funding?

From TFA

The judge added: "Hbos, of course, was perfectly entitled to do what it did and to continue to require the company to collect deposits, knowing full well that those depositors would not get their money back if the companies went into insolvency and knowing full well that those deposits would have benefited the bank alone."

Essentially, as I read it, HBOS knew that Farepack were insolvent, but required Farepack to continue trading - ie collecting deposits, because this money would pay HBOS's loans - the suspicion forming in my mind from the Judge's statement, being that HBOS planned to keep Farepack trading but pull the plug when Farepack's accounts were at their fullest - before Farepack started providing the Christmas hampers.

opinions4u

From my recollection, Farepack's parent company moved capital from Farepak to another subsidiary.

They put HBOS in a position of having to lend a further £3m to Farepack, a firm that had just deprived itself of working capital, or call in existing debts.

For the judge to say banks should lend in such situations is completely ridiculous.

Possibly they saw the writing on the wall as far back as 2006 and Farepack was just one of its first victims

Nah. They didn't realise they were under threat until well in to 2008. If you look at the HBOS reports and accounts for 2007 you will see that they had no idea they were under any sort of threat. You can tell that they were beginning to lend to business with less caution.

Pocket_the_lot

Prior to 2002 (I ceased to be an agent by that time) there was an expectation of Kleeneze expanding its operation into mainland Europe. I specify mainland Europe because when kleeneze moved into Ireland it changed its name to Kleeneze Europe LTD.


When the news came that Fairpack had gone into liquidationin 2006 my first thoughts considered if there was a connection with this attempted expansion. The reason for this is that it was common knowledge that Fairpak was the parent company of Kleeneze and my view is that such a venture into Europe would entail a fair amount of risk. By this time I had been out of the loop and could only speculate. It is only now,after reading the article indicated in Money Saving Expert that I decided to take a look and all that can be said about this is that a closer look must taken into the interrelationship of the companies. I sense jiggery pokery going on because Fairpak was the parent company of Kleeneze. Wikipedia states '' Following the 13 October 2006 collapse of Farepak and its parent European Home Retail, Findel purchased Kleeneze'' European Home Retail was Kleeneze. So how could it be sold off. If Kleeneze was a viable asset then should it not have been used to pay back the savers that ultimately lost out?


The Kleeneze operation had remained in Hanham since its inceptieon and as an agent I had taken a look around its old unused manufacturing sheds and this area and was quite extensive. Therefore the only explanation for moving to Warmly would most likely be to capitalise by selling this large asset for profit. It would seem to be an unlikely move if the intention was to stay put in business. This move took place in 2004 about the same time period as moving into Holland and later Germany.( we do not know how many countries were tried and failed).


It is certainly odd that credit was not given at that time when every body was receiving unsolicited invitations from the Banks to take out loans. It was the height of the housing bubble and the feel good factor (all an illusion of course).

Pocket_the_lot

Here are some links and statements for anybody interested:

History of Kleeneze V Fairpack.
http://www.moneysavingexpert.com/news/shopping/2012/06/high-court-action-against-former-farepak-bosses-abandoned
£40 million was lost by 120,000 former customers when Farepak, which ran a savings scheme which helped people to spread the cost of Christmas spending across the year, collapsed in 2006.


https://en.wikipedia.org/wiki/Kleeneze


edirected, or deleted. (April 2012)
Kleeneze Homecare is a multi-level marketing company, and was started in 1923, in Hanham, Bristol, England. The founder, Harry Crook, had emigrated to America with his family several years earlier and while there joined Fuller Brush as a sales representative. He returned to Bristol several years later and started his business making brushes which were sold door-to-door by salesmen. Kleeneze was bought by Findel PLC in 2007 after the collapse of their parent company European Home Retail.
Since the 1980s, Kleeneze has used a different approach, using catalogues which each independent distributor delivers to householders and then fulfills the orders. This method is not without drawbacks as many people throw away unsolicited mail without reading it although many distributors have devised strategies to minimise the losses.
The company remained at its original Hanham site for almost 80 years, but in May 2004 relocated to its new office headquarters and distribution centre in Warmley, Bristol. In 2007 after the acquisition by Findel the move to Hyndburn was announced.[1]
After trading for over 80 years throughout the United Kingdom, expansion of its Network Marketing business programme into Europe started with the Republic of Ireland, followed by the Netherlands in 2004 and Germany in 2006.

[FONT=Verdana, Arial, Helvetica, sans-serif]http://www.kleenezefasttrack.com/Kleeneze_PLC.htm [/FONT]
[FONT=Verdana, Arial, Helvetica, sans-serif]After celebrating their 75th anniversary in 1998, Kleeneze extended it’s operations into Ireland and changed it’s name to Kleeneze Europe LTD with an annual turnover of £200million+. [/FONT]
[FONT=Verdana, Arial, Helvetica, sans-serif]Now in the new millennium, Kleeneze has expanded into the Netherlands and has plans for the rest of mainland Europe in the near future.[/FONT]

https://en.wikipedia.org/wiki/Kleeneze
The company remained at its original Hanham site for almost 80 years, but in May 2004 relocated to its new office headquarters and distribution centre in Warmley


https://en.wikipedia.org/wiki/European_Home_Retail


European Home Retail plc (EHR) was a listed UK company, operating in home retail. Though registered in Swindon, Wiltshire, its head office was based in Warmley, Bristol. On 13 October 2006, it was announced EHR and its subsidiary Farepak had gone into administration.
Kleeneze Europe

Kleeneze was sold on 13 October 2006 to Findel plc.
https://en.wikipedia.org/wiki/European_Home_Retail
In 1995 Farepak purchased the older Kleeneze Homecare business from Arcadia Group plc, and changed its name to Kleeneze plc, hiving off its original business to a subsidiary Farepak Food and Gifts Ltd. By 2006 Kleeneze plc changed its name once more to European Home Retail plc.
Kleeneze Europe

Main article: Kleeneze
https://en.wikipedia.org/wiki/Findel_plc
Kleeneze Europe is a multi-level marketing company, founded in 1923 by Harry Crook in Bristol, England. Following the 13 October 2006 collapse of Farepak and its parent European Home Retail, Findel purchased Kleeneze together with I Want One Of Those.com and Kitbag companies from the group for £34 million,[3] of which £2.5 million went directly to the failed Farepak.[