Tighten rules against firms collecting advance payments

There must be tougher laws against those who offer services with payment collected in advance ("California Fitness shuts remaining outlets"; yesterday).

The ease of starting any new business here must not become an easy tool to cheat people.

In 2012, a car workshop which sold warranty and servicing packages went bust, with devastating effect ("Police probe closure of car workshop"; March 28, 2012).

Several hundred thousand dollars in premiums and advance payments had been collected by the time it abruptly shut down.

Car dealers who bought the cover for their customers were left with no cover.

Because of the huge repair claims, some dealers eventually went bust, and the car owners eventually found themselves forking out money to pay for their repairs.

Why are businesses which collect cash upfront free to do what they want? The authorities should tighten this loophole.

A business that needs to collect money upfront must be made to obtain a separate licence to do so.

Because they are handling so much money upfront, they will also have to go through training on money laundering activities.

The laws, too, need to be changed so that if fraud is proven, there are provisions for jail sentences to be meted out to directors of such failed businesses.

Only with these efforts can consumers' rights be protected.

Chua Boon Hou

A version of this article appeared in the print edition of The Straits Times on July 21, 2016, with the headline 'Tighten rules against firms collecting advance payments'. Print Edition | Subscribe