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From: Austin Chu,
Finally! I work for a company that manages and tracks gift cards, and I’ve been following this issue on savvywallet.com. If the FTC passes this new law, this would make gift cards a safer purchase for consumers. I’m just surprised it took this long. Gift cards are still the #1 gift and should be protected. I wonder how long it will take? After every retailer files? Consider this. Last year $100B was spent on gift cards and around $8B was lost. I’m sure the numbers will be higher this year.
Posted on: September 18, 2008 3:36 PM
The gift card issue is typically governed by a bankruptcy judge’s decision. The cards are treated as debts, and it is up to the company to decide whether or not it is willing or able to pay them. That means many times any Joe or Mary trying to get a piece of their $50 back would have to file a claim like any other unsecured creditor and hope for distributions, which, depending on the case, could end up happening months or years down the road, if at all. Such may be the case with Sharper Image, whose unused gift cards still have roughly $20 million of credit on them.
Championing the cause for those holders is the Consumers Union, which is petitioning the Federal Trade Commission in an effort to protect consumers from losing cash on gift cards when retailers file for bankruptcy.
The CU said it is trying to force retailers to maintain a reserve of funds from gift card sales so that they are always covered, regardless of a company’s fortunes. The agency even wants the FTC to stick its nose into Chapter 11 cases and petition bankruptcy courts to force debtors to honor gift cards at full value.
** Note **
Gift cards are not the same as a creditor – these were cash paid products sold at the store. Their cash value has its face value as the cash that was paid when it was purchased. For these companies and the bankruptcy judges, the FTC and the Department of Commerce, the US Congress and Federal Judges to allow these companies to fail paying these out first from their available assets – it is criminal, grand larceny because of the millions of dollars it represents and embezzlement of the highest order.
It needs to be explained to the bankruptcy judges in terms they can understand. This represents fraud because these cards are sold as cash and are not being redeemable. It is also misrepresentation and stealing. That isn’t commerce – it is theft.