The Board of the GGF Fund Ltd has taken the decision to not accept any deposit payments into the GGF Deposit Indemnity Fund from 1st April 2020 due to the uncertain and unprecedented market conditions caused by the COVID-19 crisis.
The GGF Fund Ltd Board, having sought and taken specialist legal advice from several experts, took the decision to close the Deposit Indemnity Fund to any new deposit registrations from 1st April 2020.
John Agnew, GGF Fund Chairman commented, “This immediate action was necessary to protect the GGF Deposit Indemnity Fund and also to ensure the GGF Fund Ltd Board discharge their legal obligations as Directors. This decision was not taken lightly but upon expert legal advice and on behalf of GGF Deposit Indemnity Fund Members in an extremely difficult trading environment.”
The timing of this decision means that the GGF Deposit Indemnity Fund current insurance cover expired on 31st March 2020. With the extent and length of the COVID-19 lockdown in the UK unknown, re-insurers could not take on the existing risk levels in the current market conditions. Although insurance is now in place from 1st April 2020, the terms of the cover are still not sufficient to cover several large or multiple small liquidations.
Mark Austin, GGF Fund Director commented “With the worsening COVID-19 situation and the resultant closure to trading throughout the industry for an unknown period of time, the GGF Fund Ltd Board of Directors found itself in a position where legal advice had to be followed. The advice was to cease taking on new deposit registrations to protect the monies currently held by the GGF Deposit Indemnity Fund. The decision to close the Fund to new business, though regretful, was taken in the best interests of the Fund Members and their customers.”
The implications of this decision now mean that GGF Deposit Indemnity Fund Members will need to take their own actions to ensure that they comply with the requirements of their chosen Competent Person Scheme in England & Wales. Examples of compliance may be;
- That companies wish to encourage consumers from whom you take a deposit from to pay some or all of the deposit by credit card (as long as the total contract value is above £100 and below £30,000). The GGF Fund Ltd, advises that all companies who take deposits seek their own specific legal advice on this compliance.
- That customers buying products via credit finance agreements should have their deposits protected under Section 75A of the Consumer Credit Act as long as the total contract value is under £60,260. Again the GGF Fund Ltd, advises that companies seek their own specific legal advice on this.
The GGF Fund Ltd will still provide cover for deposits taken by GGF Fund Members up to 31st March 2020 as long as any premiums for deposits taken up to that date are paid to the GGF Fund Ltd., by the 30th April 2020.
Under the GGF Deposit Indemnity Fund Rules, the consumers’ deposit monies will not be covered, until a GGF Fund Member pays the premiums on deposits taken up until the 31st March 2020. Deposit protection is a legal requirement of the Competent Person Schemes in England & Wales.
John Agnew added, “Fully paid up GGF Deposit Indemnity Fund Members, will be entitled to any re-distribution of funds if there is a surplus after paying out all valid consumer claims and other costs associated with the administration of the GGF Deposit Indemnity Fund. We have contacted all GGF Fund Members asking for a detailed breakdown of all deposits taken between 1st January 2020 and 31st March 2020. In the longer term and when the trading landscape returns to normal, the GGF will continue its commitment to Members by looking for a competitive insurance based deposit indemnity product to help them protect their customers’ deposits.”