Gift Card Blog - ScripSmart

Gift Cards, Bankruptcy, Blockbuster and California Section Code 1749.6

Earlier this week, I received an email from a California consumer regarding thee gift cards. Clearly Liz had done some research and is a savvy consumer, she writes:

"I am in possession of 3 older Blockbuster Gift cards and I went to use them the other night. Opps, I found out that even though they are selling NEW gift cards, they are no longer accepting old ones.

I have looked into the California State Gift Card Law and California Civil Code 1749.6 that states even if a company goes into Bankruptcy, it needs to honor the gift cards purchased before bankruptcy.  I have called Blockbuster and got no where.

DO you have any advice for me? It's not really about the amount of money on the cards - it's the principle at this point."

My Advice

We should all aim to use our gift cards sooner than later.

If you're a person who tends to forget about them, sign up for a free ScripSmart account so you can be reminded monthly of the gift cards you own. We also send out alerts when we catch wind a gift card may soon become worthless.

In fact, we sent out several alerts to those who registered a Blockbuster Gift Card in their ScripSmart account and the first one was months before the gift card actually became worthless. It's ScripSmart's solution to a common problem consumers face with gift cards.

California Section Code 1749.6 

Liz also mentions California Gift Card Law in her note. Specifically, section 1749.6(b) which states:

"An issuer of a gift certificate who is in bankruptcy shall continue to honor a gift certificate issued prior to the date of the bankruptcy filing on the grounds that the value of the gift certificate constitutes trust property of the beneficiary."

I'm a fan of seeing such a law on the books because it helps give consumers one last opportunity to redeem their gift card while the business is liquidating it's assets.

But section 1749.6(b)  does not help Liz and other holders of the "Old Blockbuster Gift Card" recoup any value. It's confusing and one of the reasons I wasn't happy to see Blockbuster start issuing a new gift card less than a year after it's gift cards had become worthless.

Keep in mind, there are two different types of Blockbuster Gift Cards in consumer's hands right now:

Issued by Blockbuster, Inc. = Old Gift Card (worthless)

Issued by Blockbuster, LLC = New Gift Card

You have to look at the back of the card to determine which one you have. This difference offers some insight into why Blockbuster is not currently violating California Gift Card Law.

The Old Blockbuster Gift Card is what has been issued for years and it was honored while Blockbuster Inc. was in bankruptcy (up until April 2011). That process ended when Dish Network purchased the assets (brand, locations, etc.) of Blockbuster, Inc. and then formed Blockbuster, LLC. 

Blockbuster, LLC is a completely separate legal entity and is not in bankruptcy and never was in bankruptcy. Dish Network was given the option to accept the Old Blockbuster Gift Cards, but they were not required to do so by the Bankruptcy Court.

It's all much more confusing than it should be and I really wish Dish Network would not have introduced this level of confusion to the marketplace, it's simply bad for consumers and the gift card industry as a whole.

Dish Network Gives Gift Cards Another Black Eye With New Blockbuster Gift Cards

This morning, I noticed Blockbuster had started selling gift cards, again. At first, I was excited at the possibility of all those worthless Blockbuster Gift Cards gaining their value back. Perhaps DISH Network Corp. had come around and done the right thing by choosing to accept gift cards issued before it's acquisition of Blockbuster earlier this year; it would be great for consumers and was long overdue.

DISH Network: A New Low

Unfortunately, DISH Network Corp. is still acting in a very selfish manner by choosing not to accept the old Blockbuster Gift Cards and they've just made things a lot worse by issuing new gift cards with the same brand less than a year after all the "old" Blockbuster Gift Cards became worthless. Furthermore, there is no mention on the company's website of the old vs new blockbuster gift cards. Blockbuster has chosen to ignore the matter all together in that regard.

Bad For The Gift Card Industry

DISH and Blockbuster's decision to start selling gift cards is terrible for the gift card industry, an industry known for getting bad press.

A company going out of business, and consequently it's gift cards becoming worthless is not even as bad as this situation. That's because:

• It's completely avoidable: Blockbuster has actively selected to purse this strategy. 
• It's very confusing: issuing gift cards with the same brand less than a year after millions of dollars was wiped out of consumer's pockets is horrible. 
• Nothing will make consumers fell cheated more than being denied of redeeming an old Blockbuster Gift Card while the company sells it's new Blockbuster Gift Cards at the same point of sale counter.
• It's scenarios like this which result in more legislation aimed at regulating the gift card industry.

Make No Mistake

From time to time you'll hear people say something like: "A few bad apples give the gift card industry a bad name." Make no mistake about it, DISH and Blockbuster are two of those bad apples. Not once, but now twice. I wish the Blockbuster's Leadership Team would think a bit more before acting so selfishly and giving the gift card industry a second black eye.

American Airline's Chapter 11 Bankruptcy: Use Your Gift Cards

Yesterday, American Airlines filed for Chapter 11 bankruptcy protection. Those who added the American Airlines Gift Card to their ScripSmart Account received a bankruptcy alert via email suggesting they redeem their gift card as soon as possible. It's an easy way for ScripSmart to help consumer avoid worthless gift cards. (You can create your free account here.)

It's never good to see a bankruptcy and for gift cardholders, it serves as what may be their last signal to use a gift card before it becomes worthless. The fact is, most companies continue to honor and sell gift cards after filing for bankruptcy protection. It's also true many company's emerge from Chapter 11 in a better financial position to serve consumers for years to come and continue accepting gift cards. However, when a merchant files for bankruptcy protection, there is a much greater risk it's gift cards will become worthless.

We don't need to look back far to see two Chapter 11 filings from large national merchants result in worthless gift cards. Blockbuster filed for Chapter 11 in November 2010 and it's gift cards were worthless in April 2011. Similarly, Borders filed Chapter 11 bankruptcy protection in February 2011 and it's gift cards were worthless in September 2011. The bottom line is, there a very real possibility of a gift card becoming worthless and gift cardholders don't need to risk it. Unlike most creditors, they hold a loan which can be redeemed for merchandise at any time.

As a result of the bankruptcy, both American Airlines Gift Cards are currently ranked "Buyer Beware" by ScripSmart:

Proper Disclosure

Often times when a company files for bankruptcy protection, gift cards are not mentioned on their website or press release. However, there are companies which specifically address gift cards. Thankfully, American Airlines is one of those companies. On their website this morning I noticed a prompt stating gift cards would still be accepted. I reads:

"American Airlines is continuing to sell and honor AA Gift Cards as usual.American is flying normal schedules and all customer programs are continuing as usual.Additional information about the Chapter 11 reorganization is available at www.aa.com/restructuring."

The company also has constructed a webpage dedicated to the restructuring which also addresses gift cards. Both are great to see from my perspective and help relay important information to consumers. I'll add, if you own an American Airlines Gift Card, use it before you lose it.

Both Dippin Dots, Filene's Basement File For Bankruptcy Protection

Consumers who own a Dippin Dots eGift Card or Filene's Basement Gift Card should go out and redeem ASAP. Both companies filed for Chapter 11 bankruptcy protection this week.

Dippin Dots offers consumers an eGift Card which is accepted an all 142 locations. The company's "ice cream of the future" might soon become a thing of the past. According the Wall Street Journal, the Dippin' Dots, Inc. owes Regions Financial Corp. $12 million and has resorted to bankruptcy protection in order to avoid foreclosure. It appears Dippin Dots will continue to fight another day. Hopefully the company can emerge from bankruptcy and continue honoring gift cards.

Filene's Basement, on the other hand, will be closing it's doors for good. I sent in a note to confirm gift cards would be accepted during the liquidation process, but have not heard back. The historical discount retailer, founded in 1909, has 21 locations primarily in the Northeast.

 

 ScripSmart Accounts Help You Avoid Worthless Gift Cards

ScripSmart will send you helpful alerts for gift cards you own. From a handy monthly summary of the value of your gift cards, to bankruptcy alerts when a company in in jeopardy of going under. It's easy, just register your gift cards with ScripSmart and configure the alerts you'd like to receive. Create an account here.

Chevys, El Torito and Acapulco Restaurants File Bankruptcy Protection

If you own a El Torito Gift Card, Chevy's Gift Card or Acapulco Gift Card, go out there and redeem it soon. Yesterday, Real Mex Restaurants Inc. the parent company of the above restaurant chains filed for Chapter 11 Bankruptcy protection.

The company's operations are heavily based in California, a state hit hard by unemployment and the housing market's downward spiral. Unfortunately, there was no mention of gift cards in the company's press release. The Real Mex is still selling it's gift cards online and I've contacted them to find out if if gift cards will still be accepted during the reorganization. Regardless, go out there and redeem to ensure you don't end up with a worthless piece of plastic.

Typically, when a restaurant files for Chapter 11 bankruptcy protection, gift cards are still accepted and sold. However, it's likely several locations will close in order to improve the company's finances. In other words, the location nearest could very well close it's doors which will make redeeming that gift card rather inconvenient.

A Chapter 11 filing indicates the company intends to stay in business; however, we've just seen both Chapter 11 filings from Borders and Blockbuster result worthless gift cards. If you're in the market for a gift card, be sure to check it's Gift Card Score. The financial condition is an important part of every Gift Card Score. We also keep a list of gift cards to avoid which is designed to help you avoid buying a gift card which might become worthless.

ScripSmart Accounts Help You Avoid Worthless Gift Cards

ScripSmart will send you helpful alerts for gift cards you own. From a handy monthly summary of the value of your gift cards, to bankruptcy alerts when a company in in jeopardy of going under. It's easy, just register your gift cards with ScripSmart and configure the alerts you'd like to receive. Create your account now.

Last Day To Use Borders Gift Cards: September 27, 2011

If you're still holding on to a Borders Gift Card, you better use it quick. While most locations across the country have closed their doors, you can still use the gift card onile at borders.com, but you don't have long.

I reached out to Borders this week and was informed:

"Please be informed that we are still accepting gift cards for online orders, we are still honoring gift cards up until September 27, 2011."

First off, cheers to Borders for having an answer and and exact date.

Second, you have less than two weeks to use that gift card online.

Third, being that it's online, you have no excuse other than to pull the card out, place an order and get something in exchange for your gift cards. 

Remember, when a merchant goes out of business it's gift cards become worthless because there is nowhere to redeem the gift card. Furthermore, there is never enough money in the bank to cover all the debts of the business and unfortunately gift cardholders fall low on the priority list for repayment.

So, here is the link to borders.com.

If This Is News To You

If you're just hearing about this, you should sign up for a free ScripSmart account where you can add the card you own and get helpful gift card alerts. It's a free service and we've already sent out several emails to those who register the Borders Gift Card with us. Sign up here.

Blockbuster Has It's Gift Card Holders Singing The Blues

Update 12/15/11: Blockbuster has started selling gift cards again. The old gift cards are still not accpeted for payment; however, I'm told old gift cards will be exchanged for 5 free movie rentals and blockbuster employees can not check the balance of old gift cards. My thougts here.

The Blockbuster gift card became worthless five months ago. Late March 2011, Consumers were given just two weeks notice to redeem their gift cards or lose their value. Unfortunately, two weeks is not nearly enough time to get the word out to gift cardholders; there are still many who are unaware the gift card they own is now worthless.

This event was a result of DISH Network, Inc. purchasing the Blockbuster business and choosing not to accept outstanding Blockbuster Gift Cards.

To be fair the Bankruptcy Court did not require the buyer of Blockbuster to honor outstanding gift cards. In either case, DISH Network could choose to accept Blockbuster gift cards at anytime. 

As more time goes by, the chances of Blockbuster Gift Cards being honored become less likely. If you own a Blockbuster Gift Card, don't throw it away, yet. There is a chance it will be accepted at some point in the future.

Here are a few reasons Blockbuster should choose to accept the gift cards:

1. Not Accepting Is Bad For The Brand

When a company is purchased out of bankruptcy and the business maintains the same branding, locations and staff, it's hard for consumers to understand why their gift card is no longer accepted. Understandably consumers feel duped by the new owner. Just take a look at the blockbuster gift card complaints listed as comments from my original blog post covering this matter.

For example, one woman writes:

"I spent an hour looking for movies to rent as well as my little kids. Once we were ready to check out and pay for the movies we wanted to rent using the blockbusters gift card, I was told they were no longer acceptable cuz Dish networks bought out blockbusters. I had never seen any postings or warnings about it. My kids and I walked out without any movies. What a disappointment and shame. The stores are still called Blockbusters instead of Dishbusters. Why?!"

Unfortunately, DISH Network is more concerned with acquiring Netflix's customer base than retaining the existing Blockbuster customer base which own gift cards. In fact, my local Blockbuster has a huge sign reading: "Tired of seeing red? Say hello to Blockbuster".

I say Blockbuster has it's gift cardholder singing the blues. 

2. Not Accepting Is Bad For Consumers

When DISH Network acquired Blockbuster it was not announced how many gift cards or the total dollar amount of which was expired. One can assume the outstanding balance of gift cards is significant because it was specifically excluded from the purchase agreement by the Bankruptcy Court. Furthermore, DISH Network has decided not accept the gift cards and in turn damage the brand it acquired.

As a result of their decisions, Dish Network, Blockbuster and the Bankruptcy Court have taken money out of a lot of consumer's pockets.

3. Not Accepting Is Bad For Gift Cards

It's no secret, gift cards often receive a bad rap from the media and consumer advocates. At ScripSmart, we think there is more to the story than "give cash not gift cards" advice. Events like this are a big reason why consumer advocates do not like gift cards. Unfortunately, this scenario will be played out again in the future, only with different names as buyers and sellers.

ScripSmart offers a list of gift cards to avoid, Gift Card Scores, and free user accounts to help consumers get the most from their gift cards. One step gift card issuers could take is a money back guarantee. Basically, the business would keep the money with a trusted third party and should the business go under, the cash is safe and consumers can get a refund for the gift card. Unfortunately, there is no gift card which offers such a guarantee.

In the meantime, be sure to take a look at the Gift Card Score before making your next purchase.

 

5 Tips To Avoid Risky Restaurant Gift Cards

Restaurant Gift Cards are one of the most popular types of gift cards. We love treating others to a great meal. It's also no secret running a successful restaurant is one of the most challenging business models. As a result, gift cards to a restaurants can be risky and those to smaller, local restaurants can be among the most risky.

Case And Point

Earlier this week, I was watching one of my new favorite television shows, Bar Rescue, and I was reminded of the risk involved when buying a gift card.

For those unfamiliar with the shows concept: Bar Rescue takes a Bar/Restaurant on the verge of closing it's doors, brings in an expert to make some dramatic changes and at the end of the week the business often has new branding, a better trained staff and a chance to fight another day.

The episode I watched rescued Swanky Bubbles in Philadelphia. The business was losing around $4,000 a month and was on the brink of closing it's doors. At the end of the show, there was an indicating the rehabilitation efforts did not pan out and the owners reverted back to the previous brand. After the show ended, I went to the Swanky Bubbles website and learned the sell gift certificates. Naturally, this would be a risky purchase.

While a gift card to a national restaurant chain such as the Chili's Gift Card is by no means immune to becoming worthless, typically there will be warning signs the business is in trouble and you'll have an opportunity to use your gift card before the doors close for good.

On the other hand, it can be difficult to determine the financial health of a smaller independent restaurant. Furthermore, when the owners decide it's time to call it quits, the doors often close abruptly and consumers are not given one last chance to redeem gift cards.

5 Gift Card Tips

While a smaller business may not be an open book when it comes to their finances or plans to stay in business, there are several things you can do to reduce the chances of loosing value of a gift ard while still support local independent small businesses:

1. Buy a gift card to a place your recipient visits frequently. This way the gift card is sure to used sooner than later.
2. If your familiar with the restaurant, take note of it's popularity. If the restaurant is empty during prime business hours, it's a sign the money may not be coming into the business.
3. Take note of the condition of the facilities. If things are in disrepair, the business might not be generating enough cash to reinvest back into the facilities.
4. Ask the staff: "How business has been?" or "How ling have you ben here?" If there is a revolving door of servers and bartenders it could be a sign tips are low or management is poor.
5. If the business is frequently out of stock for items on the menu, it could be a sign there is not enough money in the bank to properly stock inventory.

In the end, I'm not suggesting consumers avoid gift cards to local business or restaurants. Just be aware of the risks, make a smart gift card purchase and decrease your chances of the gift card becoming worthless with the tips above.

The Future Of Borders.com: Gift Cards Will Not Be Accepted

I've seen several articles in the press lately about the Borders brand living on and the notion of consumers still being able to shop at borders.com after the liquidation of all Borders locations. While this is likely true, it's also a bit misleading and important to keep in mind, there will be a new owner of the Borders brand and Borders Gift Cards will not be accepted by the new entity.

Here's Why Borders Gift Cards Will Not Be Accepted

In short, during the liquidation process, Borders will sell all company assets to help repay it's debts. Most of us think of assets such as: inventory, books, cd, shelves, charis, etc. However, the company will also sell it's intangible assets; things like the rights to it's brand name, logo, website and customer marketing lists. The new owner of the Borders brand will not be required to accept the existing Borders Gift Cards. They are merely buying assets of the company and not liabilities (gift cards).

This Has Happened Before And Will Happen Again

One only needs to visit hollywoodvideo.com to see this in action. The company went out of business for good in 2010. If you visit their website today, you'll see the same familiar logo and a link to shop now. It turns out NECA Inc. purchased the rights to the Holllywood Video brand. Often times a company who purchases the brand name of a defunct company is interested in the traffic it can drive to their existing business. In fact, if you click on the 'Shop Now' link, you'll be directed to NECA's Amazon shop. And guess what, Hollywood Video Gift Card are not accepted for payment.

So, to sum it up: if you own a Borders Gift Card, go out there and use it ASAP. It will soon become a worthless piece of plastic.

Borders To Close All Locations: Gift Cards Will Soon Be Worthless

In February 2011, I wrote about Borders filing for Chapter 11 bankruptcy protection and urged consumers to redeem their gift cards before it was too late. We've also listed the Borders Gift Card on our list of gift cards to avoid for quite some time as a warning consumers should not buy the Borders Gift Card.

The Doors Are Closing, Gift Cards Will Be Worthless

Late Monday, Borders Group, Inc. announced the doors will be closing for good. The company was unable to find a buyer and liquidation will begin as soon as this Friday, July 22, 2011. According to the company's press release, the liquidation process is expected to conclude in the month of September. 

For anyone still holding a Borders Gift Card: go out there and redeem it now because it will soon be a worthless! It's not safe to assume gift cards will continue to be accepted through the entire liquidation process.

Unfortunately, the company's press release gives no information for gift cardholders. We've sent a note into Borders asking for more details on their plans for honoring gift cards.

As I'm writing this, Borders is still selling gift card via it's website. Let's hope they cancel any orders placed after this announcement.

Update: Borders got back to me with the following:

"...gift cards are being accepted through the liquidation sales. Sales are expected to begin as early as this Friday in some stores.Stores are expected to close by the end of September."

Also, gift cards are currently no longer being sold on borders.com.

A Not So Distant History Lesson: Hollywood Video

Not long ago, Hollywood Video (Movie Gallery) closed it's doors for good. They liquidated all assets and offered consumers the ability to redeem gift cards as long as the doors were open. Unfortunately, locations closed pretty fast and there was not much communication as to when each location would close.

My understanding is the doors for each location remained open as long as there was merchandise to be sold. In the end, the company's gift cards are now worthless and we moved it to the gift card graveyard. The Borders Gift Card will be in buried there, too.

ScripSmart Accounts Can Help

Remember, ScripSmart offers a free account system for helping consumers avoid getting stuck with a worthless gift card. We've already sent out messages to those who have registered ownership of the Borders Gift Card in their ScripSmart Account. If you'd like a little extra help on this front, just sign up here and add the gift cards you own. Also, we send other helpful email alerts to ensure you're getting the most of your gift cards.