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The research note entitled Retailer Bankruptcies: Are Gift Card Holders
Just Another Class of Creditor
looks at four cases of retailer bankruptcy and reviews what happened to gift
cards in each case.
Retailer gift cards are one of the most popular gifts in the
United States. When a retailer goes bankrupt, however, customers holding gift
cards could be told to get in line with the rest of the company’s creditors.
While there are no set rules about what happens to gift cards in the event of a
bankruptcy, previous cases show that the picture is not always bleak.
Mercator Advisory Group’s research note examines four major
retailer bankruptcies and evaluates how gift card holders fared in each one. The
analysis considers how gift card programs can be affected by bankruptcies both
of their own issuer and of their rivals.
issuers should consider the value of their gift card programs in the best and
worst case scenarios and plan ahead to maximize that value for their card
holders and their companies," Ben
Jackson, director of Mercator Advisory
Group's Prepaid Advisory Service, and author of the research note,
Companies mentioned in this document: Borders, Brookstone, RadioShack, Sharper Image,
Sports Authority, and TSA Stores.
Highlights of the research note include:
recent retailer bankruptcies with different results for gift card holders, one
asking for continued redemption of gift cards and the other allowing customers
to exchange the cards for cash
for retailers to think ahead about how bankruptcies would affect their gift
courts’ inconsistent rulings
reason why honoring gift cards in a liquidation is good business sense