Part 4: Consumer rights and disputes Chapter 3: Consumer Savings Schemes Section 285: Insolvency protection requirement
The primary purpose of this section is to mitigate the risk of loss to consumers upon the insolvency of a trader offering consumer savings scheme contracts. The section provides that consumer savings schemes must be underpinned by arrangements that will cover, in the event of the trader’s insolvency, the cost of refunding payments made by a consumer which have not been redeemed at the time of insolvency. A trader can choose whether to protect payments by way of a trust arrangement or through insurance cover but cannot choose a mix of both options.
	The requirement to protect payments made by consumers to consumer savings scheme contracts is intended to extend to traders who are established outside the United Kingdom and offer such schemes to consumers located in the United Kingdom.
	A trader’s insolvency is defined by reference to the trader being subject to insolvency the meaning of which is defined in section 285 subsection (4), paragraphs (a) to (f). This defines insolvency to include a broad range of personal and corporate insolvency events. This approach should provide more certainty for business and consumers alike.