KitNotes

Thousands of working people have just had Christmas stolen from under them. Why? Because it made HBOS a profit.

For working class people, Christmas is a very expensive time of year. We’re constantly being told that going into debt is a Really Bad Thing, and that thousands of people more, year upon year, are going bankrupt because they can’t keep up with repayments. Already, Christmas advertising has appeared in stores and on TV adverts. Nothing unusual in that, but for the estimated 4.2 million people with bad credit, replacing Santa with your Visa card just isn’t an option.

Which is where companies like Fairpak come in. The idea is quite simple; rather than splurging out over December for your Christmas shopping, you save a little each month and then, by Xmas time, you’re issued with vouchers. Sounds like a good idea, right? Of course it is! That’s why Fairpak had over 150,000 customers, with many customers also acting as agents; recruit your friends, and you get (well, got) a cut. You could say that it’s similar to the Avon ladies of times gone by, coming round to sell you cosmetics, but I think it was a lot more cynical. Obviously, you might not pay much attention to a flyer through your door, or even when I myself call you up out of the blue to sell you something you may not want, but you trust your friends and family, right? Bingo. More business.

Of course, the bubble couldn’t last long, but it’s surprising that it actually did. Farepak has been going since the 1960’s, which, in the fickle world of financial services (which, let’s not forget, was the industry that Farepak was in more so than anything else) makes Farepak an old hand at this kind of thing. The 1960’s was the era which also gave us the Girobank, and suddenly working class people not only had access to free current account banking, but also the means to save up for Christmas time.

It all went pearshaped, according to BBC News, when the Choice voucher scheme went bust. Choice vouchers, unlike the Gift Vouchers you usually get from stores, work on the principle of credit; Farepak savers would get these vouchers to use in a variety of stores, and then Choice would settle the accounts with the retailers in the new year. However, when Choice started to find itself in some financial hot water, it naturally went bye-bye, owing retailers £50million. Now, you might think that in a sector which makes billions in profits each and every year without fail, £50 million would be like the loose change I’ve just fished out of the washing machine (32p, in case you were wondering). But, of course, when capitalists are concerned, there is never such thing as enough profit. So, as they do, they changed the rules and demanded payment upfront.

It is like a domino effect. It starts when one company goes bankrupt (Choice) and then it affects another group of companies (the retailers) and then it affects another group of companies (Farepak et al). Of course, Farepak bosses, and the natural inability of bosses to see past the end of their noses, didn’t realise that if there was even a slight change to the rules they would be in… well, trouble, and that a contingency fund might have been a good idea. In fact, Farepak themselves relied upon credit, in the form of a massive overdraft from HBOS plc (formerly known as Halifax and Bank of Scotland until they merged).

It might have also been a good idea for Farepak bosses to have had a back-up plan in case something like this did happen - a good thing can’t last forever, as the saying goes. Which meant that they ended up with a £40 million hole. Now, you might have thought that alarm bells would be going off with a deafening volume at Farepak HQ and that a cessation of digging might also have been a good idea, but as I think you can garner now, good ideas were somewhat lacking at Farepak HQ. A Good Idea (former Farepak bosses take note) would have been to hold up your hands, admit that you were very naughty boys and girls, and stopped taking payments. But they blustered and blundered and said everything was fine. And carried on taking paments.

As I’m sure anyone with an overdraft will tell you is that, one day, that overdrafts are repayable on demand. And, yes, you guessed it, HBOS did exactly that. On the 20th of October, Farepak went into administration.

So, who’s gained from this fiasco? Well, it’s quite clear that Farepak customers haven’t. They will get very little back, if anything at all. Agents, who persuaded their friends, families and workmates to take park, have lost out not just on commission, their own savings (because Fairpak agents would also have been Fairpak customers themselves) as well as, quite possibly, the trust of the people they recruited. Fairpak workers will have also lost out on wages, too.

But, one persons’ loss is another persons’ gain. Fairpak directors will have gotten paid. But the big winner in this whole affair has to be HBOS.

No matter what the ‘little’ people might be able to salvage from the Farepak carcass, HBOS will have gotten paid - big time. If they recover the debt owed to them by Farepak, they will also be able to recover the interest and the fees they charged Farepak, which will be a tidy sum, I can assure you. But, if they cannot, then no matter; the banking industry routinely insures big and unstable debts to make sure that they can recover it. And, if Farepak didn’t have “big and unstable” written all over it, then I don’t know what does. Legally, they have to do this, because if they had to write off over £40m as bad debt, it would be a massive dent in their operation, and it will be ordinary savers and mortgage borrowers who would feel the pinch in higher charges and interest rates (HBOS being the biggest mortgage lender in the UK, this would affect a lot of people).

Of course, the fair and charitable thing to do would be to have not called in the overdraft until after Xmas. But the problem with this, is that it would have been fraud. They could have extended the company’s overdraft - no doubt that many of Farepak’s customers would also have been Halifax and Bank of Scotland customers, too - and helped save the company. But that would have not produced a profit, as in business, profit is king.

A comparison to the Grinch might seem somewhat droll, but it’s also inaccurate. The Grinch was just a nasty bit of work, an angry and sad individual, who wanted to inflict misery upon all the little boys and girls, because he hated Christmas. While this is the obvious side affect of HBOS’s actions, it wasn’t their main thrust. They have left hundreds of thousands of working class families out to dry because they needed to make a profit.

The answer? Seize HBOS profits and redistribute them to Farepak families. HBOS must not be allowed to profit from the misery of hundreds of thousands of people, which is exactly what has happened.

Some affected customers are fighting back. They’ve set up unfairpak.co.uk, where they are organising to take action against HBOS. They are being supported by Jeff Cuthbert AM of the Welsh Assembly. Give your support!