Many people will either receive or give store gift cards this Christmas.
The general public is well aware of the gift card debacle following the administration of the House of Fraser. Basically the administrators refused to honour them. They said that the gift card holders were unsecured creditors of the company. The net result is that, at most, they will receive only a few pence in the pound on the card.
What is the Legal Position?
This unfortunate result was not restricted just to gift cards. Customers who had purchased goods online, prior to the company’s administration but not yet delivered, were told by the House of Fraser’s new owners. Sports Direct, that they would not receive a refund. This is because ‘property’ in the goods did not pass when they were purchased but, rather, when they were delivered. So legally, the goods in question were owned by the administrator.
Of course members of the general public will be unaware of the nuances of the sale of goods legislation and the complexities of and the legal implications once a retailer goes into insolvency. The problem could be solved if’ ownership of the goods’ passed to the purchaser as soon as they were paid for, rather when they were delivered, by which time the vendor could be insolvent. Indeed, this issue is currently being reviewed by the Law Commission. Their recommendations, if accepted by the government could resolve the problem.
Can Customers be Protected?
The most obvious step which a consumer can take will be to redeem the gift card as soon as possible, thus minimising the prospect of the retailer becoming insolvent.
Another method will be for the card’s purchaser, who will give it as a present, to have bought it with a credit card. This is because the Consumer Credit Act 1974 provides that a card’s issuer will be obliged to refund pre-payments for undelivered goods having a value of between £100 to £30,000. There is also a provision under card schemes operated by VISA and MasterCard that in the circumstances just described the payment debited to the cardholder will be charged back. These payment reversals will apply notwithstanding the value of the purchase.
So the most obvious protection to take, rather than paying cash for the gift card, is to use a credit card.
For further infomation please contact Stephen Cowan on 0141 572 4251.
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