Deposit Protection: Why Installers Take Them & How to Stay Safe
17th February 2022 - By Jason Clemmit
Deposit Protection: Why Installers Take Them & How to Stay Safe
Home improvement work usually costs thousands, if not tens of thousands of pounds. Often up to two thirds of a home improvement project will be in material costs. With installers having orders booked weeks and often months ahead, many products need to be ordered in advance, especially where they are bespoke products such as windows, doors, or conservatory products. This means the installer will need to pay for them before they are fitted.
For small installation companies, deposits can be extremely important as if they have tens of thousands of pounds tied up buying products, it can very easily adversely affect the cash flow of a business and mean that they need to charge a premium to cover this tied up cash. Asking for a deposit for some or all the product costs reduces this burden on the business and may lead to lower costs to you as a consumer especially from a smaller supplier.
Can installers ask me for a deposit?
Asking for a deposit is a valid and justified work practice within the home improvement sector, however consumers should ensure they have deposit protection before handing over money.
How to ensure that you have deposit protection
When paying a deposit to an installer, make sure to never pay a deposit with cash and always ensure that your deposit is protected before payment.
There are three main ways to guarantee that your deposit is protected:
1. Paying a deposit by credit card
If the total price of the work is between £100 and £30,000, paying on a credit card will give you free deposit protection under section 75 of the Consumer Credit Act.
2. Use a bonded escrow account
A bonded escrow account is a fully licensed, secure online company that protects against all fraud, chargebacks and wrongly described goods. The deposit or the full contract value is placed into an independent account, which allows stage payments for protection. The money can’t be drawn without the consumer being satisfied with the work. This is available through TrustMark and has a low cost, at around £6 per party.
3. Use an installer that provides deposit protection insurance
An installer can have a facility with insurance providers to protect the deposit. This will have limitations on the percentage of contract value covered, maximum value limits, and time limitations (often 90 to 120 days). The installer will arrange and pay for this cover with documentation coming direct from the insurer. However, there is a risk that the deposit is paid but cover is not provided due to a lag where the consumer will not know.
An installer asking for deposits is a valid part of the project cycle. However, you must always ensure that you have deposit protection. Make sure you are covered, by using the recommend methods of protection listed above that best suit your situation.