Debt expert highlights risks with gift cards at Christmas

Shoppers considering giving gift cards to family and friends this Christmas are being advised to understand the potential risks involved in buying them.

By David Sedgwick
Tuesday, 7th December 2021, 6:00 am
Alexandra Withers, North East chair of insolvency and restructuring trade body R3.
Alexandra Withers, North East chair of insolvency and restructuring trade body R3.

As the festive season gets into full swing and greater numbers of shoppers hit the High Street, shoppers are being warned of the risks of gift cards.

A number of retailers that have gone into administration or liquidation over recent years have been unable to honour gift cards that were bought before their insolvency process began, with shoppers losing their money as a result.Other cases have seen failing firms refusing to honour gift cards after a given point in their insolvency process.

Alexandra Withers, North East chair of insolvency and restructuring trade body R3, is advising on the potential risks.She said: “Gift cards are really convenient and can be easily bought both in stores and online, but it is also vital consumers understand how they can be affected if the retailer that offers them enters an insolvency process."Customers with gift cards or vouchers from any retailer which enters an insolvency procedure and is either continuing to trade, or has gone through a pre-pack administration, must check with store staff whether they can still redeem them.“If this is possible, it’s generally a good idea to spend them sooner rather than later, especially as your local store may be earmarked for closure or the situation across the whole organisation may change quickly, if the firm becomes insolvent.”Alexandra added: “It is understandably frustrating when a retailer won’t accept gift cards during an insolvency process, but the insolvency practitioners in charge of the process are obliged to look after all creditors’ interests according to a strict legal hierarchy, and unfortunately customers are just one of many.“Insolvency practitioners overseeing a retail insolvency have to make their decisions regarding accepting gift cards on a commercial basis and it is not a decision that they will take lightly.“If a retailer has been sold as part of a pre-pack administration, where a company enters administration and is immediately sold to another buyer, then whether or not gift cards and vouchers issued prior to the administration are still honoured is up to the new owners.”