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Gift card debt: Michigan Borders customers demand repayment

A bankruptcy court in Michigan will soon hear a case that will be of interest to virtually anyone who has bought, given or received a gift card to a major business. Many consumers who purchased or received Borders gift cards prior to the bookstore's declaration of bankruptcy in early 2011 found themselves left holding the bag when they failed to redeem the cards before the chain shut its doors last September. Two Borders customers took their displeasure a step further when they filed a lawsuit against the former chain, claiming that they were left with $125 in unused gift cards that now have no value, and that the cards represent a debt on the part of the former chain.

As a part of the bankruptcy proceedings, Borders claimed an intake of $156.2 million, designated as 'other revenue' during their last month of business. This amount includes accounting for all unused or unredeemed gift cards.

Attorneys for the two consumers argue that their clients were never given proper notice that the cards would have no value following the liquidation of the chain, and also that Borders failed to inform consumers of the deadline to file a claim for reimbursement. The trustee for the now-defunct bookseller does not believe that the former customers have a serious case to present to the bankruptcy court, stating that Borders acted appropriately in notifying its creditors of all deadlines, and that gift card holders are included in this category. He also pointed out that the closing of the chain was well publicized, and that consumers had ample time to redeem their gift cards or file a claim for reimbursement. He warned that allowing these two consumers to cash in on their now worthless gift cards could lead to a flood of similar claims.

The outcome of this action could have significant legal ramifications for the manner in which Michigan businesses conduct their operations between an initial bankruptcy filing and shutting their doors. Also at issue is whether unused gift cards are considered debt on the part of the issuing company. In addition, the lines will be drawn in regard to consumer protection in similar matters, as well as where the responsibility lies in making sure that the money deposited on gift cards makes its way to the card recipient, and not just to the coffers of the issuing business.

Source: AnnArbor.com, "Should the owners of unused Borders gift cards be compensated? Trustee says no," Lizzy Alfs, May 31, 2012

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