'Alarming rise' in losses on consumer prepayments

The car industry chalked up the highest amount of reported losses in prepayments at $2.74 million between Jan 1, 2014, and June 30 this year. Parallel importer Exodus Global was among those which closed recently and left buyers in the lurch.
The car industry chalked up the highest amount of reported losses in prepayments at $2.74 million between Jan 1, 2014, and June 30 this year. Parallel importer Exodus Global was among those which closed recently and left buyers in the lurch.ST PHOTO: CHEW SENG KIM

Amount lost more than tripled from $1m in 2014 to $3.6m last year; $1.8m lost in first half of 2017

There has been an "alarming rise" in the amount of prepayments reported lost by consumers following business closures over the past 31/2 years, the Consumers Association of Singapore (Case) said yesterday.

The amount lost more than tripled from $1.05 million in 2014 to $3.59 million last year, and $1.81 million has already been reported lost in the first half of this year.

In total, Singapore consumers reported losses of about $8.35 million from more than 2,000 complaints filed between Jan 1, 2014, and June 30 this year. Many of the complaints relate to businesses becoming insolvent and failing to deliver the promised goods or services, despite having collected payment.

"With the current uncertain economic outlook, the risk of business insolvency may increase," Case president Lim Biow Chuan said in a statement.

The car industry had the highest amount of reported losses at $2.74 million, followed by fitness clubs at $1.39 million and renovation contractors at $1.02 million.

Travel, hair services and furniture rounded up the list of industries over which Case urged consumers to be "extra vigilant".

"As not all affected consumers lodged complaints with Case, these reported losses may represent only a fraction of the actual losses of consumers in Singapore," warned Mr Lim, who is also the MP for Mountbatten.

The consumer watchdog is continuing its efforts to enhance prepayment protection by partnering industry associations through its CaseTrust accreditation schemes, Mr Lim added.


"We hope that consumers can also take steps to protect themselves by understanding the risk of prepayments and their rights and obligations under a contract," he said.

Sudden business closures, such as that of established travel agency Misa Travel in May, had cost customers thousands of dollars in unfulfilled packages.

Parallel importers Royal Automotive, Exodus Global and TLC Cars were among car firms that closed over the past 12 months, leaving buyers who had paid hefty deposits and down payments in the lurch.

There are only 21 motoring business accredited under the CaseTrust-Singapore Vehicle Traders Association (SVTA) scheme, which offers an insurance bond of $50,000 to protect consumer payments if a contract is unfulfilled. But SVTA president Michael Lim said the association aims to get 100 of its 379 members on board over the next three years.

Mr Raymond Tang, owner of Yong Lee Seng Motor, said: "Consumers should not just look at what price is the cheapest, but look for responsible dealers with the CaseTrust mark."

Prepayment tips

1) Negotiate for progressive payment instead of paying in full upfront. When signing a renovation contract, for example, consumers can request to pay a 10 per cent deposit upon signing, 80 per cent to be paid in stages as each step of work (such as carpentry, plumbing and painting) is completed, and the remaining 10 per cent 14 days after satisfactory completion of all works.

2) Find out if the business offers any insurance or escrow arrangements to protect your prepayment. Consumers can patronise one of 750 CaseTrust-accredited spa and wellness businesses, for example, where their prepayment is protected by an insurance bond or an escrow arrangement.

3) Avoid purchasing prepaid packages that involve large sums or lengthy contract periods and opt to pay a "per use" or monthly membership fee instead. While the former typically attract bigger discounts, consumers should weigh the risk of potentially losing their prepayment against the savings.

4) Ask about the refund policy for your prepayment. Car dealers are required to inform buyers in writing of the terms of the refund policy before collecting any deposit.

5) Where possible, use payment methods that offer prepayment protection. Consumers who pay by credit card may apply to their card issuers to recover their prepayments through the chargeback mechanism for undelivered goods or services.

A version of this article appeared in the print edition of The Straits Times on August 01, 2017, with the headline ''Alarming rise' in losses on consumer prepayments'. Print Edition | Subscribe