The Sunday Times says

Proper to insulate prepayments

Payments made in advance for a series of services yet to be delivered can cut both ways where consumers are concerned. On the one hand, there is a risk of not recovering prepayments should a business fold unexpectedly; and on the other hand, there is a benefit of lower prices through economies of scale derived from committed orders. Hence, the suggestion by the Consumers Association of Singapore to circumscribe this trading option should be weighed against inputs from a variety of consumers and service providers before implementing any changes to the Consumer Protection (Fair Trading) Act. Reassuringly, this is what the Ministry of Trade and Industry proposes to do via a public consultation.

While it wouldn't be in customers' interests to effectively kill off such schemes, it's not being "kiasu" to seek ways of ensuring that payments held on trust are not misappropriated or lost through weak and dubious business practices. Until the services are properly rendered, operators of, say, spas, gyms, hair or waxing salons cannot treat prepayments for commercial packages as their own or impose "no refund" policies willy-nilly. Instead, customers' funds ought to be protected via an insurance scheme or sequestered by credible independent custodians like EZ-Link.

Certainly, such protection will incur extra costs which customers will have to bear ultimately but the trade-off would be worthwhile, especially if they are given an option to withdraw from the deal during a "cooling off" period - a feature that already exists in the Act in a different context. Higher operating costs will weigh upon smaller firms and start-ups offering novel services but protection might spur more to support them.

A version of this article appeared in the print edition of The Sunday Times on November 01, 2015, with the headline 'Proper to insulate prepayments'. Print Edition | Subscribe