Consumers Union (CU) filed a petition with the FTC Thursday to protect consumer gift card holders more when retailers go bankrupt. For as long as the stores remain open, CU wants companies to have to hold gift card funds in a secure trust, unless bankruptcy courts say otherwise. Currently…

…bankruptcy courts treat gift cards as loans to the company, and the onus is on the merchant to petition the court to let it keep accepting them. If the merchant doesn’t, then consumers have to file claims as an unsecured creditor in order to redeem the cards. “Gift cards shouldn’t be the gift that stops giving when retailers go bankrupt,” said Michelle Jun, CU senior attorney. “Unfortunately, there is no guarantee that consumers will be able to redeem the full value of their gift cards from struggling or bankrupt retailers.”

Consumers urge FTC to protect gift card holders [BusinessWeek]
Gift Cards: The gift that can stop giving [Financial Privacy Now Blog] (Photo: paper house)

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.