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Last Updated: Wednesday, 8 November 2006, 10:03 GMT
HBOS to give 2m to Farepak fund
Catalogue detail from Farepak website
Farepak customers have been fighting to win compensation
Banking group HBOS is to donate 2m to Farepak customers after the Christmas hamper and voucher firm collapsed.

Halifax, which formed HBOS when it merged with the Bank of Scotland, has been criticised for its role as banker to Farepak's parent company.

Critics say Farepak was allowed to continue trading despite its problems.

Swindon-based Farepak ran a savings scheme for about 150,000 people, but collapsed in October without offering its customers compensation.

HBOS provided the overdraft facility to Farepak's owner, European Home Retail (EHR). It was an HBOS decision not to extend EHR's overdraft that eventually led to administrators being called in.

"As banker to EHR, the company which owned Farepak, HBOS at all times sought to help its customer through difficult financial circumstances," the banking group said.

"It is right that the group helps Farepak customers as well at this difficult time."

Financial difficulties

Suzy Hall, who has been leading a campaign for compensation, told the BBC that she was "absolutely disgusted" with the sum that HBOS had offered to pay.

"EHR announced financial difficulty in June. Why did they not pull the plug in June?" she asked.

"People who have saved hard for Christmas, have literally had Christmas 2006 ripped from under them," she said.

Farepak customers are estimated to have lost about 400 each on average, though some are thought to have lost closer to 2,000.

On Tuesday, Ian McCartney, the Minister for Consumer Affairs, described the situation as a "national emergency" and announced that the Farepak Response Fund was being established with help from York-based charity Family Fund.

Supermarket giant Tesco has pledged 250,000 to the fund and called on other firms to help. Marks & Spencer also offered 250,000, and Morrisons is donating 150,000.

Christmas hamper supplier Park Group has also said that it is donating 1m of High Street vouchers to the fund.

In another effort to help, High Street firms Sainsbury's and John Lewis have agreed that Farepak customers can get 25% of the value of their savings in vouchers for their stores.

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