Paying deposits for goods
October 2007
Be careful about paying deposits in shops or as a down payment on particular services. If you change your mind about the goods or service, or the company goes out of business, you might lose your deposit.
If you intend to buy something from a shop, you might pay a deposit so that they will hold the article for you. However you should be sure that you definitely want the item, as if you change your mind, the shop might not be obliged to return the deposit to you.
Deposits are also often sought from consumers to secure services, for example booking a caterer, holiday or a long-haul flight. Again, if you change your mind, you will probably lose your deposit.
Terms and conditions
If you are paying a deposit, always check with the shop or supplier what your rights are. By paying a deposit, you are entering into a legal contract. If you change your mind, you may not be entitled to get a refund. However the retailer might let you use the equivalent amount towards something else in the shop, so make sure you know what you are entitled to.
You also need to agree when full payment of the balance will be due and make sure you are clear about when the product will be available or delivered.
Liquidation
If you pay a deposit to a shop and it goes out of business, you may not get your money back. Shops which have trading problems go into liqudation and consumers can end up being 'unsecured creditors' - the last group that a liquidator has to pay with any surplus funds.
This happened with a bridal shop in Cork in 2006. The Wedding Dress Shop, which had debts of €1.1m, closed its doors without notice and went into liquidation, and at the time it had orders for 180 dresses on its books.
Many women who had paid deposits on wedding dresses lost their deposits and did not receive their dresses. They were told at the creditors' meeting after the shop closed that there was little chance of recovering their losses.
Insurance
With occasions like weddings where large sums of money are paid out to a variety of suppliers, you can choose to take out specialised insurance. This will cover for bankruptcy or liquidation of any pre-booked supplier who has received a deposit. The insurance can also cover the additional cost of arranging alternative equivalent suppliers.
Many travel insurance policies will also cover bankruptcy or financial default of suppliers. So if you have a holiday booked and the hotel goes bankrupt, you will most likely be compensated.
Credit cards
If you have paid for an item by credit card, and the retailer then goes out of business, it is possible for the credit card company to cancel the payment if they have not already paid it out. This is not an automatic right but check with the credit card company if they can do this as many will oblige if it is possible.
Return of a deposit
Finally, in some cases you are entitled to ask for your deposit to be returned, for example if the retailer does not meet their responsibilities. For example, if you are buying a couch and pay a deposit, but delivery of the couch takes longer than agreed, you may be entitled to ask for your deposit to be returned.
Always check you rights and the terms and conditions when paying a deposit.
Learn more
Learn more about on your consumer rights while shopping