Are Holders of Unused Gift Cards Left Holding the Bag When The Retailed That Issued Those Cards Declares Bankruptcy?
When a retailer goes out of business, are consumers who are holding outstanding gift cards issued by that retailer just another class of creditor? Does the retailer’s bankruptcy mean you have to stand in line in Bankruptcy Court behind the retailer’s suppliers and bankers in order to redeem your birthday present from Aunt Mildred?
New research by Mercator Advisory Group examines this issue by reviewing four cases of retailer bankruptcy. In a report called Retailer Bankruptcies: Are Gift Card Holders Just Another Class of Creditors.
This is an important piece of work, given the prominence of these cards in the payments ecosphere and their relatively low rate of redemption. There are a lot of unused gift cards lying around in places like my desk drawer.
According to Mercator, the Report covers cases with differing results for gift cardholders. It examines inconsistencies in bankruptcy court rulings as well as reasons why honoring gift cards in a liquidation is good business practice.
“Gift card issuers should consider the value of their gift cart programs in the best and worst case scenarios and plan ahead to maximize that value for their card holders and their companies “ says Ben Jackson, director of Mercator Advisory Group’s Prepaid Advisory Service.
For more information on Mercator Advisory Group or their research into gift card liabilities visit them at mercatoradvisorygroup.com, or follow them on Twitter @MercatorAdvisor.
Mercator Advisory Group is an independent research and advisory firm exclusively focused on the payments and banking industries.