Despite issuing a press release claiming that they will “continue to conduct business as usual,” The Shaper Image has suspended redemption of all gift certificates after filing for bankruptcy late on Tuesday.
After receiving several complaints that gift certificates were not being honored by the store the Consumerist was able to confirm via email with the Sharper Image’s corporate sales staff that the retailer is no longer selling or accepting the cards.
Reader Javier is stuck with a $279 store credit from a defective Roomba:
I called customer service and they sent me a Merchandise Certificate for $279 dollars. They couldn’t send me a new Roomba because they don’t consider it the same product since its a new version. During the holidays, no store in the Chicago area had the Roomba in stock, so I was left out in the cold again for 2 more months. Now, I finally go to the store and hand them my certificate and I’m told that due to Chapter 11, SI is not accepting Merchandise Certificates or Gift Cards from anyone.
Reader Jonathan’s boss is stuck with a credit card rewards gift card from Mastercard:
The card was a reward gift from Mastercard. My boss used the gift card ($500.00 total) to purchase some speakers. Today he went online to purchase a digital camera with the remainder (over $250.00) and the card would not process. He called Sharper Image customer service see what the problem was and the representative told him they had suspended gift card redemptions due to the bankruptcy.
According to the California Department of Consumer Affairs legal guide on gift certificates, the holders of cards may have a claim against the bankruptcy estate of a retailer that files Chapter 11. If the court has prohibited The Sharper Image from redeeming gift certificates, you are considered a creditor in the case, says the CDCA.
You may be entitled to file a claim, but as an “unsecured creditor” you’re pretty far down in the pecking order and aren’t very likely to get anything.
“Consumers should weigh the potential benefits of a successful or partially successful claim, against the inconvenience and expense of pursuing the claim, Even a successful claim will take time. Bankruptcies in which there are assets can take up to a year or more before creditors are paid. In many cases, there are no assets.
Your prospects for receiving your money are better if the a store chooses to file Chapter 11 bankruptcy [ed. — like Sharper Image.] This means the store intends to reorganize, emerge from bankruptcy and continue doing business. But many retail stores fail to achieve that goal. Most Chapter 11 bankruptcies eventually end up in Chapter 7 bankruptcy, which involves liquidation of all assets and going out of business for good.
If you bought your gift card you may want to try a chargeback with your credit card company, but otherwise it looks like you’ll can just sit tight and wait it out or file a claim with the court.
Consumer Tips on Retail Bankruptcies (PDF) [California Department of Consumer Affairs]
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@krom: Sounds nice… but once they enter bankruptcy protection they are protected.
How long after a purchase can you do a chargeback?
In the case of the guy who bought a roomba and now has nothing, can he do a chargeback from several months prior for the original purchase?
Nothing says “I think you are a complete and utter douche bag” more than giving someone a Sharper Image gift card as a gift.
@ClayS: wow. i never looked at it that way. lending them money at 0% interest.
you have convinced me to never buy a giftcard again and instead just hand people cash if i can’t come up with a better gift idea.
From the same California guide:
“A gift certificate or gift card sold by a seller that seeks bankruptcy protection may have no value. However, the holder of the certificate or card may have a claim against the bankruptcy estate.
Sellers that file “Chapter 11″ (reorganization) bankruptcy intend to stay in business, so they typically will ask the bankruptcy court for permission to honor gift certificates in an effort to maintain good customer relations.
If the bankruptcy court does not allow gift certificates or gift cards to be honored, or if the seller files “Chapter 7″ (liquidation) bankruptcy, holders of gift certificates or gift cards are creditors in the bankruptcy case. They have relatively high priority among unsecured creditors in a Chapter 7 case, and may receive some percentage of the certificates or card’s value, but only if the bankruptcy estate has enough assets to pay claims. For information on filing a claim, and other basic information on bankruptcy, see “Consumer Tips on Retail Store Bankruptcies,” under the “Bankruptcy” tab under the “Publications” button at http://www.dca.ca.gov.
A recently-adopted California law is intended to help gift certificate and gift card holders when the seller declares bankruptcy. It requires a seller in bankruptcy to honor gift certificates issued before the date of the bankruptcy filing. No court has ruled on the effectiveness of this law.”
@scoosdad: I think that to accept credit cards you have to accept liability for selling items that aren’t as described, so if they still accept credit cards they still have to be subject to chargeback. I think the policy may vary from card to card, so maybe Amex would give you your money back while Discover might not (I’m just using names here as an example) but if SI is still taking credit cards, then shouldn’t they theoretically still have an account to chargeback the fraudulent purchase against?
Hmm,I have a whole wallet full of gift cards I had better go redeem before the stores declare Chapter 11.
Are they taking returns while in bankruptcy? If so, and I had a gift card, it seems like a perfect time to flip-flop on my “retail renting is not ethical” position. Hell, I’d probably go so far as to buy something the value of the card, and file a charge back for that amount.
Damn, just when I had enough gift cards saved up for that giant “Aliens” replica.
@picshereplz: “Also, businesses don’t do Chapter 7s.”
Wow, I meant to say they’re not doing a Chapter 7. Yikes.
I would just walk in, take $279 worth of stuff, hand them my gift card and walk out.
@ClayS:
That was.. the best explanation of gift cards I’ve ever heard. Thank you.
Wait a second, you have to pay to put money on a gift card, and they don’t accept it? In that case, sue to get your money back. Frickin’ ridiculous.
good one@coan_net:
quick, sell it on ebay before everyone else finds out!
i kid, i kid…
@scoosdad: No. The Sharper Image is, essentially, a creditor of the credit card company. The CC company regularly sends a bunch of money into the Sharper Image’s account as payment for the credit card purchases. If you issue a charge-back, then that amount gets deducted from the next amount they send to the Sharper Image.
@nursethalia: Good luck on that. When a company is in bankruptcy, suits are generally stayed, especially if they’re by creditors trying to get their money back.
@coreynyc: Just to be clear…I was not given the gift card as a present. It was handed to me and my dad said “I’m never going to use this, do you want it?”
@aaron8301: OK, so you sue them, and the judge agrees that their conduct is outrageous, and orders them to refund your gift card IMMEDIATELY. And adds penalties, for fraud, and because the Ionic Air Transmogrifier was stupid.
Great! You are now in possession of a judgment.
Now it’s time to collect on the judgment. How do you collect? Why, you get in line with all the other schmucks to whom they owe money, but who are dicked because of the bankruptcy.
Not optimal.
I had just redeemed my Discover reward for a Sharper Image Gift Card last week. After reading about this on Consumerist I called Discover and told them what happened. The lady I talked to hadn’t heard about this, but she offered to either give me a different reward or to put the $20 back on my account so I could redeem it later. It was really easy! Hooray for Discover card!
@coan_net: My thoughts exactly, this is complete BS. If they are still open they should honor those gift cards.
I just posted a warning in Ebay’s guides about this. There are about 30 of them on there now. These people are going to get screwed.(Some are going over $450. Sad.
@Snarkysnake: eBay was notiifed at 10AM this morning about the situation. They have ignored the warning and could very well be liable for the loss for not acting on the material information provided to them.
[www.leginfo.ca.gov]
SHARPER IMAGE IN CALIFORNIA IS REQUIRED TO TAKE GIFT CERTIFICATES!!!
CALIFORNIA CODES
CIVIL CODE
SECTION 1749.6 (b) 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.
@D-Bo: They should, but it’s up to the bankruptcy judge. Almost everything in a bankruptcy has to go through the judge to get approved. You should have seen the mess when a big Boston jewelry store closed its doors just before Xmas (and the owners skipped the country off to India). The court had to approve the use of company stationary by the managers appointed to manage the sale of the company.
The Sharper Image has plenty of collateral. If sharper image owes you money, consider doing it the old fashion way. Walk in and TAKE the collateral.
*smiles at camera*
If I had a giftcard from this place and they refused to honor it while I’m standing in THEIR store with THEIR merchandise on the shelves, I’d pick out the MOST expensive thing I could carry and head straight for the exit. No joke. FUCK THE SHARPER IMAGE! Good riddance…
@laserjobs: As charlah writes, “No court has ruled on the effectiveness of this law.” A bankruptcy court is very unlikely to void the Code’s priority scheme based on a state statute. Good luck with all that, though.
I have some sympathy for cardholders. The funds paid for the cards constitute trust funds and/or the cards represent a secured debt. It is just that (i) the funds have already been spent, so there is no way to recover them in bankruptcy (they’re already gone), and/or (ii) they are junior to the company’s other lenders and those lenders’ recorded liens (not that you can be secured in cash except through possession anyway).
People and corporations file bankruptcy every day. Banks and suppliers feel the pain everyday (from the special assets group at the bank, to the lady who makes the “50% off” signs, to the coffee company, to (on a more painful personal note) the professionals they owe money then they file). That you feel it on a personal level may be new to you, but it is why the Court’s and the bankruptcy laws exist: fresh start for debtors and equality of distribution for all creditors.
YEA! Finally a story about corporate policy and not the usual crap about a individual that sucks at customer service.
ON that note: I can’t believe this move is legal. Especially in CA.
I would NEVER buy someone a gift card for a specialty retailer. I mean, If you give someone a Wal-Mart or Exxon or Safeway gift card for example, there is almost zero chance of a situation like this.
Per the CC transaction, you have received the goods. Therefore a chargeback is not going to be allowed.
The fact that you failed to take the goods with you as you departed the store is your fault. Oh sure what good is a gift card, but that is not the point. The important issue is that YOU failed to use the card promptly. In the eyes of the CCC Sharper Image did not do anything wrong, thus no chargeback.
Now, if you if are a good little boy or girl and your CCC really likes you, there is a chance that your CC will refund the money to you and take the chance that they can collect from Sharper Image at a later date. But that is up to the individual CCC and their desire to make you feel good.
In the mean time the court is not going to allow chargebacks as those charges (collection of funds) would be paid out of sequence with secured creditors.
@Bunklung:
And go to jail.
At this moment Sharper Image does not exist as a functioning company. Those items that you removed from the shelf belong to the secured creditors. The unsecured creditors can mop up the floor and recover anything that they can find.
[digg.com], yo.
Replace “Friends don’t let friends do drugs!” (And watch him die after depriving him for a critical heart medication? Too broad.) with “Friends don’t give friends gift cards!” (There, no more room for ambiguity!)
Reason #28 why you should never give gift cards.
By the way, your issuing bank will always file a chargeback for you. If the merchant (in this case Sharper Image) does not respond to the chargeback, it is actually the merchant account provider (the bank that processes their CC transactions) who takes the hit for the disputed amount.
A gift card is a bad gift. A sharper image gift card is a super terrible gift.
Wow. Trade credit is supposed to be the first claim during any liquidation and Chapter 11 is designed to allow trade to continue. If gift cards aren’t trade credit, I don’t know what is. This smells really bad and I wouldn’t be surprised if they reverse course. They should.
The man’s always got his foot on your neck
Just curious, what do folks think of gift credit cards? Most banks have them. I think gift cards are horrible. They’re only useful for certain situations (housewarming parties, weddings, etc) where a lot of them will do good in one place.
But credit cards/cash have the drawback that the recipient will use it for non-gift stuff, like bills.
@humphrmi, scoosdad, AaronZ, Buran, StevieD, patnpendin
It would be foolish not to try to get the credit card company to refund your money. The purpose of filing a chargeback is that the credit card company has a very large amount of bargaining power compared to an individual, especially in the context of a bankruptcy. Also, its not just the credit card company’s bargaining power, its the insurance company’s bargaining power who is backing you up, because the credit card company has purchased a policy to cover its chargebacks.
@ubuwalker31: You mean, an insurance policy to cover chargebacks that the credit card company has no hope of recovering from the original source, like this SI bankruptcy, or fly-by-night outfits that disappear.
I work with a lot of retailers who accept credit cards, and trust me, the chargeback comes out of their pockets, if they’re still around to be charged back.
what gets me is that i bet the sharper images’ ceos and execs are still getting a hefty paycheck, while tons of people are out a few hundred dollars each for their rommbas and stuff.
Discover Card just refunded my $40 cashback bonus award ($80 Sharper Image) that I had requested in *July 2007*! It’s worth a few minutes of your time to ask. I’m pleasantly astonished.
SHRP had $34.808 million in deferred revenue liabilities (e.g. gift cards) on its balance sheet in the Company’s last 10-Q filing. Undoubtedly, you can imagine more than a few people are going to be affected by their giftcard-refusal policy.
What a bunch of bloody coonts!
There is no “insurance company” that backs CC transactions. There is no bargaining power when it comes to chargebacks…it is a case by case situation. The bank that issued the purchasing card initiates a cb with the acquiring bank. Should the merchant avoid paying the cb, it is the acquiring bank that foots the bill. Believe me, I underwrite merchant accounts for a payment processor so its my job to know this.
@Hawk07: The order is bond holders first. Then the preferred stock holders get the proceeds from liquidated property. Common Stockholders… well they’re boned.
@Kounji: A more fullsome list would have trade creditors first (which I would imagine gift cards are, in addition to utility bills, etc), then secured debt holders (bank debt, mortgages, etc.), then unsecured debt holders (bonds), then subordinated debt holders (subordinated bonds), then preferred stock, then common stock, then me.
A DAY AT DULL IMAGE
After hearing the news the other day about Sharper Image’s financial difficulties, I decided today to redeem my $80 gift card that I got from my Discover Card back in November of 2007, by redeeming $40 worth of my cash-back rewards money. I finally made up my mind on 4 purchases, three of which were substantially discounted and even qualified for an additional 10% off. My card was going to be left with a balance of $2.49, for which I requested it back in cash from the clerk, as they have done in the past for such a small amount. He went off to the manager, whom I have dealt with before. The manager came back to tell me that they weren’t accepting gift cards at this time at all and handed me a piece of paper stating their new extremely flawed policy, to which I responded “that sucks!” He quickly took the bag of merchandise back from me. I should have grabbed the bag and thrown the $80 card at them and said keep the change. But I didn’t. Unlike them, I am honest. Meanwhile while I was trying to cash out, I was being offered an additional 15% discount if I applied for one of their credit cards, fat chance, knowing what I now know! I found this message board and took the advise of some to call Discover Card. I owe a great deal of gratitude to these posters. Sitting around until mid-March to find out that I have been screwed doesn’t interest me at all. Joanne of Discover Card honorably credited back the $40 that the $80 gift card had cost me. I did notice too that Discover Card has already taken down the offer for Sharper Image on their Cash Back Rewards program web page.
I will never shop at Sharper Image again, and I feel bad for the people who really get stuck by them. If they really think they will be able to reorganize and get customers like me back, they have another thing coming. I smell Chapter 7 coming on very quickly for this company. It is too bad. I had gotten some really great deals from them using my Discover rewards that basically made everything half price already (as long as they weren’t extremely expensive items, like Roombas, etc), and I almost always made sure that I was getting items that were substantially reduced during Sharper Image’s sales, so I really made out very well. Yes, they don’t sell too many items that are low or even moderate in price.
Sharper Image deserves to go out of business. You don’t treat customers who show up wanting to buy merchandise with a legitimate way of paying for it and basically tell them to leave the store, and by the way you aren’t going to take the merchandise home with you. Clearly this is a company that should have gone out of business several years ago in an honorable fashion, not by ripping customers off. They still mention gift cards on their web site. I am sure that the top executives still are making their outrageous salaries while their hard working employees will be left with nothing in the end, except closed stores.
Good riddance Sharper Image. You should change your name to Dull Image. By the way, selling those Trump Steaks was one of the stupidest things they ever did. I am sure that Donald got paid his money before pulling those losers off the shelves. But then again maybe they owe him lots and lots of money!….
Lucky for you. I’m the one who got stuck with the $279 certificate and no recourse. I loved my Roomba and if it hadn’t been for SI, I would have sent it to iRobot and gotten it fixed. I would have an older model, but a working one to help keep my place clean.
bastards!