SINGAPORE - Consumers need more safeguards when they make prepayments, said Consumers Association of Singapore (Case) president Melvin Yong on Thursday (Dec 30).
Consumers have lost more than $3 million in prepayments since 2019, according to Case data.
Mr Yong wrote in a blog post that current laws do not sufficiently protect consumers who might have paid thousands of dollars in prepayments to a company that becomes insolvent.
Typically, the administrator assigned to wind up the company will first pay off secured and preferential creditors, such as banks and employees.
What cash is left will be divided among unsecured creditors, which include customers, suppliers and landlords.
High-profile business closures where consumers lost their money in recent years include tour agency STA Travel, which reportedly collapsed last year, owing customers and former staff more than $1 million.
Mr Yong said: "I hope that the Ministry of Trade and Industry (MTI) could review industries where consumers report a high amount of prepayment losses and consider mandating prepayment protection in these industries."
As part of licensing conditions, the MTI could also require the industry to better inform consumers of the steps they can take to protect themselves against business closures, he added.
Case has been working with trade associations and stakeholders to develop joint accreditation schemes for specific industries that have a high number of complaints, said Mr Yong.
These include firms offering services in spa and wellness, motoring and renovation.
Those that are accredited have committed to fair business practices and consumer-friendly policies, which include mandatory protection against prepayment and deposit losses.
"This means that customers would be refunded their unconsumed but insured prepayments and deposits if the company goes bust," Mr Yong said.
The accreditation, called CaseTrust, has protected more than $308 million worth of consumer prepayments since 2011.
There are more than 770 CaseTrust accredited entities in around 10 industries today.
Besides protecting consumers at the outset, industries that receive many complaints regarding pressure sales tactics should have a mandatory cooling-off period, Mr Yong said, especially if they collect hefty prepayments.
"In recent years, the beauty industry received a high number of consumer complaints regarding pressure sales tactics. Many consumers have given us feedback about being aggressively pestered to purchase high-priced beauty or massage packages after their free trials or treatments," he added.
A mandatory cooling-off period will mean a consumer can cancel a spa or beauty package within five days, for instance.
"This will help reduce the number of pressure sales tactics complaints as consumers will have ample time and space to consider their purchases and not be forced to accept packages sold under pressurising or 'compromising' situations," said Mr Yong.