There is a difference between prepayment for a facial or haircare package and a deposit for a sofa set ("Protecting consumers who make prepayments"; Oct 21 and "Proper to insulate prepayments"; Sunday).
The former entails an intangible service that the customer has no way of examining beforehand, whereas the latter is based on a physical product that can be inspected prior to delivery. The customer who purchases the service is in a riskier position.
The objective of prepayment schemes is presumably mutual benefits: Customers enjoy substantial savings, while service providers get advance payment.
When service providers fail to deliver, however, customers are left without a means to seek recourse. Therefore, industry players should consider assuming additional responsibility and complying with the Consumer Protection (Fair Trading) Act (CPFTA).
Critics advocate doing homework before signing up for such deals. However, one cannot reasonably expect customers to single-handedly uncover illicit practices, or predict whether they will be cheated.
If service providers were to operate under the CPFTA, with clearly stated terms and conditions, including prepayment guarantees, in case of default, this will put both sides on an equal footing. There would be fewer grounds for dispute.
The actual implementation of a compulsory prepayment protection clause is not in itself a great hurdle in the industry.
There are numerous avenues to implement this protection, among which are banker's guarantees, factoring services, insurance policies and third-party custodians, like EZ-Link.
Any additional cost incurred can simply be factored into the price of the advertised package.
As a deterrent, greater penalties should be meted out to those found guilty of contravening these regulations, setting a firm example for the rest of the industry.
Special discount packages with prepayment can and should be win-win deals.
Paul Chan Poh Hoi