Bank's £8m for ex-hamper customers

A bank has decided to make £8 million available to help former customers of the collapsed Farepak Christmas hamper business after a judge suggested it should look to its morals.

Mr Justice Peter Smith had pointed the finger at Farepak's bankers during a hearing at the High Court in London.

HBOS defended its actions last month after the judge accused it of taking a "hardball approach" and suggested the bank should "seriously consider" adding to the £2 million it put into a distress fund in 2006 for Farepak's customers.

HBOS is now part of Lloyds Banking Group, which said in a statement that it has chosen to make an ex-gratia payment of £8 million "in the light of recent comments from Mr Justice Smith".

It said it emphasised that HBOS acted legally, but said the group had "wider responsibilities" to the community as well as legal and financial obligations.

The Lloyds Banking Group statement said: "We are now working to ensure that this money goes directly to those customers. While HBOS acted legally in its dealing with the company, as the judge himself acknowledged, we are mindful that, in acquiring HBOS in 2009, the Group took on not only its legal and financial obligations, but also wider responsibilities.

"We have a crucial role to play in supporting business and the communities in which we operate. In making our decision we have looked carefully at the very specific circumstances surrounding the failure of Farepak and the economic and social impact resulting from it."

The bank said last month that its staff "acted entirely appropriately" throughout its relationship with Farepak's parent company, European Home Retail plc, which also went into administration.

The judge spoke at a hearing in London after a Government companies' watchdog abandoned attempts to penalise former Farepak bosses by having them barred from being company directors. Lawyers representing the Insolvency Service - part of the department headed by Business Secretary Vince Cable - halted litigation after "consideration of evidence" was given.

The court heard that following the collapse, claims by customers and "agents" against Farepak amounted to about £37 million.