The dangers of gift cards

Recently, LMI have been involved in a number of claims involving theft by trickery and what we have found is that people have skimmed credit cards and then used them to purchase gift cards, which at the end leaves the retailer of those gift cards with the loss when the bank has reversed the transaction and the thief has the equivalent of cash in the form of gift cards. Consumers are also being caught with gift cards in a number of different ways.

One of the things that I’ve felt was extremely unfair leading up to Christmas is that the Dick Smith stores were encouraging consumers to purchase gift cards and then went into liquidation shortly thereafter leaving all the consumers with the unused proportion of the gift card as an unsecured creditor with little to no hope of them getting anything back. Dick Smith are not the only ones, there are a number of examples in recent times of day spas and beauty salons selling these gift vouchers, taking the cash and then shutting doors. A member of staff recently purchased a voucher as a mother’s day gift where the shop has now closed up. However, a new store has now opened in the same place, with the same staff, same uniforms, however a different business name therefore leaving the vouchers unusable and the store turns around to say “that isn’t them, it’s a different business”.

Another member of our team, purchased a substantial gift card for their daughter before Christmas. The daughter’s purse was stolen and so the staff member went to the retail store, in this case David Jones, where they showed proof of purchase of the gift card and asked that it be stopped and a fresh card reissued. The retailer refused to do this saying that the loss was at the risk of the consumer.

A more common issue is the fact that most gift cards have an expiry date which is said to be there to protect the consumer, but of course, the retailer has a win every time the consumer fails to use the gift card within the stipulated period. Therefore, anyone with a busy life is likely to get caught out with this issue.

Having said this, I will say that my wife was given a gift card for Village Cinemas and when she realised it was about to expire, she rang up the company and they were happy to extend it for another month to be used at no extra cost, which was both surprising and pleasing. I congratulate them on their approach which enhances a good customer experience, in contrast to the earlier examples cited.

I will conclude with three points.

• I think that the Government should legislate that any monies received by a retailer for the sale of gift cards, should be immediately placed into a trust account so that the consumer knows the funds will be available when called upon.
• The whole concept of the gift card, while originally had good intentions, particularly if you are looking to purchase a gift for someone who is hard to pick for, I really think the risks of the cards far outweighs the benefits. It may be better to leave a note in the card saying “Please spend $___” and then reimbursing up to the agreed amount for the individual when they find something they wish to buy. This is not as classy; however, it does offer greater protection.
• If you do purchase a gift card to minimise your risk, choose a store that is long standing and a reputable brand, however in the David Jones example it does demonstrate you are never fully guaranteed your purchase from particular circumstances.