The concept of pre-payment for future services or goods is common among certain types of businesses, including package deals by beauty, spa, gyms, as well as deposits for home renovations and big-ticket product purchases.
However, there are questions of legal and moral responsibility in the event a business not be doing well and has to shut down operations before they can fulfil all their obligations to their customers who paid in full or in part.
Here’s what companies and consumers need to know about pre-payment in Singapore and what right consumers are entitled to and what responsibilities companies have in those situations.
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What Do The Terms And Conditions Say?
The terms and conditions of the offered product or service constitute a written contract that protects both the business and the consumer, by explicitly stating the company’s obligations to their customers.
A comprehensive terms and conditions document should include a refund policy that spells out what happens if the company is unable to render the services initially offered.
As far as possible, responsible businesses should maintain sufficient cash reserves to ensure they are able to honour their own term and conditions, even in the event they decide to wind up the company.
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Pro-Active Communication With Honesty And Speed
Loyal customers can be sympathetic to the difficulties of brands they love, and especially if the company discloses these difficulties in a timely manner transparently, and shows sincere efforts to make it up to their customers, whether that is a partial reimbursement, or a tie-up with another company so customers can continue to be taken care of.
Without pro-active, clear communication with clients, it is easy for a bad situation to become worse, with customers starting to become infuriated and starting to feel like they are the victims of a dishonest company that made off with their money.
Irate customers might even lodge a police report, causing irreparable damage to the reputation of the brand and entrepreneurs, even if allegations were to be proven to be unfounded.
Companies of disrepute like oBike, Konsortium coaches, and Beautiful Love Wedding comes to mind when it comes to bad closures, and you certainly do not want to join their ranks.
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Consumer Protection (Fair Trading) Act Applies If There Is Deliberate Attempt To Defraud Clients
Under the law, the Consumer Protection (Fair Trading) Act governs deliberately malicious attempts by companies to cheat customers.
For example, it is an offence to be “Accepting payment or other consideration for the supply of goods or services when the supplier knows or ought to know that the supplier will not be able to supply the goods or services— (a) within the period specified by the supplier at or before the time at which the payment or other consideration is accepted; or (b) if no period is specified at or before that time, within a reasonable period.”
If there is wrongdoing suspected, the Competition & Consumer Commission Singapore (CCCS) is empowered with investigative powers, including raiding business premises to seize documents, and compelling the presence of relevant persons for testimony.
Seeking Redress With Consumers Association Of Singapore (CASE)
If there isn’t criminal wrongdoing, but a customer feels unfairly-treated by the company, the could lodge a complaint with the Consumers Association of Singapore (CASE). They can do so online or by visiting the CASE office at Ulu Pandan.
CASE would attempt to contact the company for a formal response to the complaint and facilitating communication, as well as escalating to mediation if necessary to reach a mutually agreeable resolution to the matter, or advising consumers on their legal options.
CASE also maintains a blacklist of errant companies who had substantiated complaints lodged against them previously, which potential future clients can see and use to decide if they wish to proceed with giving a company their business.
Bringing A Case To The Small Claims Tribunal (SCT)
Consumers who believe they have a strong case and wish to seek damages can also bring a case before the Small Claims Tribunal (SCT) , which is an organ under the Community Justice and Tribunals System of the State Courts.
Do note that claims made with the SCT must be made within a year of the cause of action accrued and damages sought cannot exceed $10,000, or $20,000 if a memorandum of consent is submitted.
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Anticipating And Avoiding Problems Before They Occur
In the course of this article, we have touched on some ways to mitigate problems with companies collecting pre-payments.
These include having clearly stated terms and conditions that specify a mutually-agreed upon procedure for handling non-fulfilment of goods or services.
Another measure could be companies progressively collecting payment at various milestones, enough for them to cover their costs, but not so much that they are exposed to unanticipated business risks or rising costs in the far future.
There are also some specific insurance policies that provide protection on prepayment fees, such as CaseTrust-accredited businesses offering spa and wellness services.
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