Which hamper company went bust

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MPs have called the Farepak problem a national tragedy and emergency. How did the business work? Farepak collected money from clients on a monthly basis throughout the year and then would issue vouchers that could be redeemed at some of the UK's largest retailers, such as Argos and Woolworths. Clients could also buy hampers of food. It allowed people to spread out their end-of-year payments, and relied on retailers trusting clubs such as Farepak to settle up the bill for their vouchers after Christmas had passed.

What triggered the collapse? Instead of extending credit for the vouchers, High Street stores now wanted to be paid up front, analysts said. This significantly changed the way that Farepak was run and the amount of money it needed to operate.

Farepak's parent company European Home Retail EHR said it would need to increase its borrowings, though this proved difficult to arrange and the company announced funding problems earlier this year.

EHR already had debts stemming from a number of problematic acquisitions. So what went wrong? According to reports, Farepak's bank HBOS, which was formed after a merger between Halifax and Bank of Scotland, was not willing to accept a new borrowing and business plan and called in the company's overdraft.

Halifax said that it had "shown great flexibility in recent months" and that it had "accommodated the company on several occasions to allow management every opportunity to find a solution to the group's financing challenge".

Despite reassurances that savers' money was safe, and the fact that Farepak was still accepting payments from customers, the administrators were called in last month. Analysts have argued that the firm may have kept quiet about its problems because it was confident of finding a solution, that may have even included selling the business. Was Farepak a fly-by-night firm? Far from it. The Swindon-based company had run a Christmas club and hamper business since , and had as many as , clients, many of whom had used the firm for a number of years.

Farepak and EHR were formerly known as Kleeneze. Are people angry? Very much so, and what has raised heckles the most are accusations that Farepak continued to accept payments from customers even though it knew it was in trouble in order to pay down some of its overdraft.

This is particularly upsetting for Farepak's agents, many of whom recruited friends and family members into the hamper scheme and club, and continued to send in payments right up until the time when administrators were called in. What can be done?

There is a chance that Farepak clients may get some money back, but at best it would be a tiny fraction of their savings and it would not be paid very quickly. One of Farepak's customers has set up a website at www. According to the website the first thing customers should do is lodge a claim with Farepak's administrators, BDO Stoy Hayward.

Who else has been criticised? What does the future hold? What has concerned watchdogs and MPs is that many of the people affected were on low incomes and through no fault of their own now face a Christmas without presents or festive foods. Some have said that they now face taking on high interest loans or using credit cards to pay for their family's dinners and gifts.

It also raises question marks over how the money collected by Farepak's agents could be used to finance its parent company. Many of Farepak's customers have promised to keep fighting for compensation and the Department of Trade and Industry has launched an investigation into what happened at the company.