Gift Cards for Christmas: What Happens if a Retailer Goes Bust?Mark Turner
What do you get for that difficult-to-buy-for family member at Christmas? We’ve all been there, and chances are a fair number of us have ended up buying some sort of store gift voucher. It’s a simple but useful option that everyone appreciates!
Against the backdrop of reports of some high street retailers going through difficult times, it’s worth bearing in mind that if the retailer whose gift vouchers you have bought ends up in insolvency, administrators routinely refuse to honour the vouchers. Instead the voucher holders are treated as if they are unsecured creditors of the company. In practice, this means that they will receive only pennies in the pound, if anything at all. This happened most recently a few months back when House of Fraser went into administration.
The problem can also extend beyond gift vouchers to goods which have been purchased online and paid for, but which have not been delivered at the time the retailer enters administration. In legal terms, “property” in the goods has not yet passed from the retailer to the buyer – it does so at the point of delivery – and so the administrators are entitled to say that the goods still belong to the company.
So, can anything be done to reduce the risk?
The most obvious step is for the recipient to use the vouchers sooner rather than later, minimising the risk of the retailer becoming insolvent.
However, there is another method that can be used in higher value purchases. If the present-giver has used a credit card to purchase the vouchers, the Consumer Credit Act 1974 provides a degree of protection where goods have been ordered and paid for, but which are not delivered. As long as the transaction value was between £100 and £30,000, the card issuer would be required to refund pre-payments.
Additionally, Visa and MasterCard both operate card schemes which provide that in circumstances where goods have been ordered and paid for but the retailer goes into administration before they are delivered, the payment debited to the card holder will be charged back and refunded. In this case, there is no minimum transaction value.
Ultimately, if you really are stuck on what to get that person who is a nightmare to buy for, the easiest way to minimise risk is to pay using a credit card rather than cash.
If you are seeking further advice on an issue with gift vouchers or cards this Christmas, or if you need help with any of the other legal issues we cover, then feel free to get in touch. You can call us on 01782 652300. You can also drop us an email at firstname.lastname@example.org.