Gift card warning to consumers over Christmas

gift vouchers

Vouchers, or gift cards, can be a great idea at Christmas.

Give them to a teacher, a colleague, or a teenager perhaps, and you can show you have at least thought about them, without second-guessing their tastes.

But last year thousands of consumers were left out of pocket, when HMV, Blockbuster, Comet and Jessops all went out of business after the Christmas period.

Most vouchers were eventually honoured but only after a period of uncertainty.

In the case of Jessops, now under new management, some people were offered replacement gifts, but customers with vouchers worth, in total, more than half a million pounds never saw their money back.

The fact is, if you buy a gift card, there is no guarantee it will be honoured if the shop goes out of business.

So can they be trusted?

Low priority

Not at the moment, argues Deborah Harvey, from Newport in south Wales.

Creditor Priority List

  • Loans on fixed assets
  • Administrator's fees
  • Staff wages
  • Loans on stock, vehicles etc
  • Unsecured creditors, including tax, suppliers and voucher-holders
  • Shareholders

She and Louise McDaid run Safeguard All Savings, a website dedicated to protecting consumers' money.

She believes passionately that gift cards and vouchers should be guaranteed if a retailer goes out of business.

"If I give you £10, I expect to be able to spend £10; not to be told, 'Well actually, your voucher has expired, you can't use it.

And by the way, we've just gone bust, so you definitely can't spend it,'" she says.

She believes the best option would be for voucher money to be ring-fenced.

In other words retailers would have to keep that money in a separate account for a specified period.

Another issue is that voucher-holders are well down the list of creditors, should a retailer go out of business.

They are currently on the fifth tier, alongside suppliers and the taxman.

Only shareholders are less likely to get their money back.


The body which represents the gift card business would like to see card holders moved up the priority list.

For the moment, any administrator looking at the books of a retailer is obliged to pay the banks which have lent money to the business, the costs of the administration, and staff salaries, long before they look at gift card holders.

"If a retailer goes in to administration, the decision to continue to accept gift cards and vouchers is down to the individual administrator," says Andrew Johnson, the director general of the UK Gift Card and Voucher Association.

A recent study by a body representing insolvency specialists looked at other possible solutions.

Start Quote

Debbi Harvey

I'm really concerned that there's going to be something again this Christmas. And it's going to be too late for anyone to do anything about it”

End Quote Deborah Harvey Safeguard All Savings

These included the idea of making retailers who offer gift cards buy a protection bond, a form of insurance which would pay out if a retailer went bust.

They also considered the idea of extending the Consumer Credit Act.

Currently anyone who buys vouchers worth more than £100 on a credit card is protected, in theory by both the credit card company and the retailer.

Where a retailer has gone bust, that responsibility in practice rests with the credit card provider.

The Act could, in theory, be extended to include smaller purchases.

However, retailers could be severely affected by such liabilities. Many of them trade on notoriously thin margins as it is.

Indeed some argue that shops might be even more likely to go bust, should they have to honour gift cards.

"All of these options are quite difficult to administer, and they are also quite costly," says Andrew Tate of the Association of Business Recovery Professionals.

"Taking cash flow out of a business in the current economic climate is difficult," he says.


So what should consumers do if they are considering buying gift cards or vouchers this Christmas?

First of all, they should watch their local high street carefully.

Blockbuster, the video chain, has already announced its intention to call in the administrators, for the second time.

"I'm really concerned that there's going to be something again this Christmas," says Deborah Harvey from Newport.

"And it's going to be too late for anyone to do anything about it," she warns.

The UK Gift Card and Voucher Association advises customers to think very carefully about where they buy vouchers from.

It says as long as you trust the retailer, you should trust their vouchers. But the reverse must be equally true.

If you wish to buy more than £100 of vouchers, make sure you buy them on a credit card.

But otherwise there are still no guarantees that your money will be safe.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories


Business Live

    06:59: Greek elections BBC Breakfast

    "The question is how Syriza is going to deliver," says Lena Komileva of G+ Economics on Breakfast. Promising to rehire workers and its other campaign pledges "without running Greece into an economic catastrophe" will be difficult to do, she says. Negotiating some leeway with the European Central Bank, European Union and International Monetary Fund - the institutions to which it owes money - will be the likely plan, she adds.

    06:46: Greek elections BBC Radio 4

    So now Syriza has won this weekend's Greek election, what happens next? There are going to have to be some renegotiations. That might lead to something being put to the European Commission that can bring about a deal, Greek economist, Vicky Pryce tells Today. She says "of course, they're [the EU] not going to like it ..... and will say at first no way are we going to do a deal with you". But eventually the EU will have to negotiate, she says.

    06:32: Tax collection Radio 5 live

    More on tax. Wake Up to Money presenter Adam Parsons asks, if you pay your tax, surely there's no problem? "People will always do things which are sometimes debateable if tax is payable or not," says Mr Bullock. Richard Murphy of Tax Research UK says £137m is a "paltry effort compared to the amount of tax not being paid."

    06:21: Tax collection Radio 5 live

    James Bullock, a partner at Pinsent Mason specialising in tax is on Wake Up to Money. A crackdown on tax avoidance and evasion by people who HM Revenue & Customs call "mass affluent" netted 60% more money in 2014, his firm's report says. It raised £137.2m in tax, up from £85.7m in 2013. Mr Bullock warned on not damaging the economy, as "an HMRC investigation can be a very time intensive procedure" and can leave people unsure what they owe.

    06:10: Greek election Radio 5 live

    More from Kerry Craig from JPMorgan on Wake Up to Money. "We are likely to see an extension of 6 months to the bailout agreement" to Greece, he says. "I don't think you'll see the Greek 10 year bonds test the highs we saw.... more and more you aren't seeing the markets price in contagion..." as Italian and Spanish bond yields are also lower than before, indicating less concern among investors, he says.

    06:01: Greek election Radio 5 live
    Alexis Tsipras, leader of the Syriza party and Greece's new Prime Minister

    There'll be a great deal of interest in the Greek election from the markets and Kerry Craig from JPMorgan Asset Management is on Wake Up to Money to talk about them. "The market reaction will be fairly muted" immediately after the election since anti-austerity party Syriza was tipped to win by polls, he says.

    06:00: Howard Mustoe Business reporter

    Good morning. Get in touch via email or twitter @BBCBusiness

    06:00: Matthew West Business Reporter

    Morning everyone. BHS owner Sir Philip Green says he is considering selling the department store chain, the euro has tanked after the anti austerity Syriza party won this weekend's snap election in Greece and Aer Lingus is believed to be ready to accept a takeover bid from British Airways owner IAG. We'll bring you reaction to the Greek election result, plus anything else we unearth, as it happens.



From BBC Capital


  • Water droplets bouncing off a laser-etched water repellent metal surfaceClick Watch

    The laser-etched metal surfaces that repel water, plus other technology news

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.