The Perils of Gift Cards

Posted on November 6, 2009 by Steven Berk

 

If you receive a gift card, USE IT as soon as possible.

As the holidays approach, with it comes the consternation and head scratching about what to get for your family and friends. For many, the answer to that question will be a gift card, but before putting down your money for a piece of plastic, consider whether your good intentions will actually result in something that the receiver can use. For those receiving a gift card, take heed of these dangers and use your gift card right away.

There are three main concerns that every consumer should have when purchasing a gift card:

1.      The gift card merchant may go out of business or declare bankruptcy

2.      A chain retailer may close the branches near to you

3.      Fine print: i.e. expiration dates and monthly fees.

1) If the gift card merchant goes out of business or files for bankruptcy, your gift card is probably worthless. That's right, even if the merchant doesn't actually shutter its doors and manages to restructure its debt through bankruptcy to continue operating, gift cards may still not be honored. In bankruptcy proceedings, unused gift cards are treated as a form of debt, and holders of gift cards are unsecured creditors. Even if a store wants to continue to honor gift cards, if they have filed for bankruptcy, it's up to the bankruptcy judge as to whether or not the store will accept them. If the judge says no, gift card holders are out of luck unless they file a claim with the bankruptcy court, and even then, there are no guarantees of success.

(Important note: Store credit, say, for items returned with a receipt and the like, are the same as gift cards. The credit is considered a debt and you are an unsecured creditor. If the merchant declares bankruptcy, you are, once again, out of luck.)

2) Merchants may close the store or stores near the gift card recipient. Gift cards are a heck of a lot less useful when the nearest store is 50 or 500 miles away instead of 5. In an age of overexpansion and some big companies cutting back their number of stores, this is a real danger.

3) Some gift cards may have fine print, such as an expiration date, a monthly fee for every month after X months, etc. Several states have outlawed these practices, but if your state allows it, the value of a gift card can be quickly eaten up in fees. Check the terms and don't let this happen to you.

The bottom line is that while gift cards are convenient, they carry a danger that the recipient won't be able to get the full value out of them. If you receive a gift card, USE IT as soon as possible. If you hold on to it until a later date, you run the risk that you will be unable to use the card.

 

Assisted by Jed Sorokin-Altmann

 

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Sadly, Unscrupulous Debt Collectors Prey on the Dead

Posted on October 21, 2009 by Steven Berk

Generally, you are NOT responsible for the debts of the deceased

Jed Sorokin-Altmann is an Associate at Berklaw who specializes in consumer protection. He provides insightful and helpful tips to vulnerable consumers who are too often preyed upon by professional con artists and even reputable corporations. Jed's message is thoughtful and concrete. We welcome his new voice.

Let's say the phone rings, and it's a debt collector saying that you aren't the debtor, you are not responsible for the debt, but because they can't collect from the debtor, would you mind being a sport and paying off the debt for them? Unless you're the softest touch around, you'd say no, if not issuing a few choice four letter words at the audacity of the request before slamming down the phone. And yet there is a segment of the debt collection market that specializes in just this sort of behavior by preying on the grieving relatives of those who have died.

Now, these debt collectors don't tell the families that they are not responsible for the debt, although they claim that if asked, they don't lie about it. According to David Streitfeld's New York Times article "You're Dead? That Won't Stop the Debt Collector" from March 3, 2009, collecting from the dead involves training in "empathic active listening," mixing "the comforting air of a funeral director with the nonjudgmental tones of a friend."

Here's what you need to know: the law on this varies from state to state, so, if you are in this sort of situation, you should consult with an attorney licensed in your state, but generally speaking, relatives are not required to pay a deceased relatives' debts from their own personal funds. Property and money inherited from the deceased is theoretically fair game, but beyond that, generally, you are NOT responsible for the debts of the deceased.

Even though you are not responsible for the debt, some collection agencies specialize in getting you to pay anyway. According to Streitfeld's article, "Some relatives are loyal to the credit card or bank in question. Some feel a strong sense of morality, that all debts should be paid. Most of all, people feel they are honoring the wishes of their loved ones." Collection agencies train their employees to play on all of these sentiments to try convincing people to pay debts that they have no obligation to pay. Some even hire grief counselors to work the phones.

The bottom line: when a loved one passes away, be wary of creditors asking you to pay for their debts. Instead of giving money to those who prey upon the bereaved, perhaps a donation to your loved one's favorite charity is a better way to honor their memory.

 

 

Assisted by: Jed Sorokin-Altmann

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