When a retailer looks like it might be in danger of going out of business, we warn gift card holders to use their cards soon, before the company declares bankruptcy and the cards lose their value. Not everyone has the good sense to read Consumerist, though, and that’s why the Texas Attorney General wants the smoldering remains of RadioShack to put aside some money for gift card holders.

The AG in Texas, RadioShack’s home state, estimates that the balance of outstanding RadioShack gift cards is $43 million. (Apparently, even people holding gift cards no longer shopped at RadioShack. The state argues that gift cards don’t come with a disclaimer that they will self-destruct if the retailer goes out of business, and marketing materials also don’t tell customers this.

RadioShack’s policy and practice provided in relevant part that these gift cards did not expire. Both prepetition and postpetition, via telephone and via their website, Defendants represented to consumers that the gift cards do not expire.

By “prepetition and postpetition,” the AG’s office means before and after the Shack filed for bankruptcy protection. Staff members in the AG’s office called up RadioShack customer service to ask about the status of their gift cards on March 2, well after the bankruptcy, and customer service representatives informed them that gift cards never expire. The gift cards would actually lose their entire value on March 31.

They also aren’t buying RadioShack’s claim that they have no contact information for any gift card holders:

Texas respectfully contends that such an assertion must be viewed with some skepticism in light of the fact that the Defendants maintain extensive data regarding their customers’ purchases. The Defendants likely know the names, mailing addresses, and email addresses of at least some of the purchasers if not the holders.

It’s that extensive purchase data that led to the previous dispute between the entity that used to be RadioShack and its home state’s attorney general: the company still had extensive data abut its customers and their purchases, which was going to be sold as part of the bankruptcy auction. The state objected, because customers weren’t told when handing over their contact information that it would be sold.

What Texas is asking is that claims for unredeemed RadioShack gift cards be given priority over lenders when the company finally liquidates. Since RadioShack knows what the outstanding gift card balance is, whatever the unclaimed balance is should be turned over to state attorneys general to be held with unclaimed funds, in case consumers find an unredeemed gift card in a junk drawer five years from now.

Texas AG Sues RadioShack Over Unused Gift Cards [Wall Street Journal]
THE STATE OF TEXAS’S COMPLAINT FOR DECLARATORY RELIEF [U.S. Bankruptcy Court] (PDF)

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