Refund Rate to Customers who Prepaid for Services by Companies which Later Close Down

Er Dr Lee Bee Wah asked the Minister for Trade and Industry (Industry) (a) what has been the success rate of customers getting back their monies for unused prepaid services when a business closes down prematurely; and (b) whether the Ministry will make it mandatory for businesses offering prepaid service packages to provide prepayment insurance protection.

Our approach to consumer protection is based on promoting fair trading by retailers and helping consumers make informed purchasing decisions, including those on prepayments.

The Consumers Association of Singapore (CASE) has also worked with industry associations to develop industry-specific CaseTrust accreditation schemes, covering areas, such as spa and wellness, school transport, renovation and motor workshops. The majority of these industry-specific schemes offer prepayment protection for consumers. According to CASE, consumers who have prepayments with CaseTrust-accredited businesses that offer prepayment protection to consumers have not suffered monetary losses due to business closures in 2016. We encourage more businesses to be CaseTrust-accredited, and to go further by providing prepayment protection if they collect advance payments from consumers. It is also important for consumers to be aware of the possible risks involved in making prepayments and their capacity to bear with possible losses before taking up a prepaid package.

Genuine business failures which result in the loss of prepayments from consumers are unfortunate. Given the wide range of businesses, it is challenging to impose broad-based measures, such as prepayment insurance, to protect consumers against loss of prepayments from business closures. Such measures raise the cost of doing business which would be passed on to consumers. Overseas jurisdictions, including those in the European Union, Australia and Hong Kong, also recognise the challenges and do not impose broad-based prepayment protection measures. Businesses which engage in unfair practices when selling prepaid packages will be investigated by the Standards, Productivity and Innovation Board (SPRING) Singapore as the administering agency for the Consumer Protection (Fair Trading) Act.