SINGAPORE - There has been an "alarming rise" in the amount of prepayments reported lost by consumers when businesses closed down in the past three and a half years, with the highest number of cases from the motorcar industry.
The amounts lost were $1.05 million in 2014, $1.90 million in 2015, $3.59 million last year and $1.81 million in the first half of this year, said Mr Lim Biow Chuan, president of the Consumers Association of Singapore (Case), in a press release on Monday (July 31).
Case received over 2,000 complaints involving losses of around $8.35 million, with many related to businesses that failed to deliver the promised goods or services, despite having collected payment.
In the press release, Mr Lim said that the industries with the highest amounts of reported losses were the motorcar industry at $2.74 million, the fitness club industry at $1.39 million, and the renovation contractor industry at $1.02 million.
The travel industry, hair industry and furniture industry rounded up the list of industries for which Case urged consumers to be "extra vigilant and do their due diligence" when dealing with them.
"With the current uncertain economic outlook, the risk of business insolvency may increase," said the press release.
To help consumers protect themselves when making prepayments, Case advised consumers to negotiate for progressive payment schemes instead of paying in full upfront, choose "pay as you use" options and avoid prepaid packages that involve large sums or long periods.
It also urged consumers to find out if a business offers any insurance to protect prepayment, such as a refund policy.
"As not all affected consumers lodged their complaints with Case, these reported losses may represent only a fraction of the actual losses of consumers in Singapore," said Mr Lim.
He gave the example of fitness chain California Fitness which ceased operations in 2015. It had 27,000 members who were owed $20.8 million in unused gym access and personal training sessions, but Case only received about 600 consumer complaints of around $1.09 million in losses.
He said: "As Case continues our efforts to enhance prepayment protection for consumers by partnering with industry associations through our CaseTrust accreditation schemes, 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."