This article was in the MetroWest Daily News and I think it is valuable to all Massachusetts residents (and others in some aspects).
In a press release today, Attorney General Martha Coakley offered the following advice to consumers to protect themselves as they kick off the holiday shopping season.
"In light of the state of the economy, consumers may want to consider whether it makes sense to purchase certain gifts this holiday season," said Coakley. "Recently, there have been many reports of stores filing for bankruptcy and it is important for consumers to know their rights and shop wisely."
What protections do I have when buying a gift certificate or gift card in Massachusetts?
Under Massachusetts law, a gift certificate or a merchandise credit must be redeemable for seven years from the date of issuance. The seller must indicate the date of issuance and expiration date on the face of the certificate.
Once a consumer redeems the gift certificate or gift card for 90 percent of its value, the balance is redeemable in cash. A purchaser or holder of a gift certificate which, by its terms, authorizes the purchaser or holder to add value, which has been redeemed in part, such that the value remaining is $5 or less, must make an election to receive the balance in cash or continue using the gift certificate. A gift certificate with a zero balance is void.
Note, however, that there are some serious restrictions on the applicability of these protections, including the seven year expiration date.
State law does not apply to gift cards issued by a national bank, even though these cards may be issued by an entity other than the bank. For instance, Simon Mall Gift Cards do not follow the seven-year rule and also charge fees, because the cards are issued in conjunction with a national bank. National bank-issued cards may be redeemable for a shorter period of time — often one or two years. These cards may also have fees attached that will diminish the value of the card over time — some have monthly "maintenance" or "dormancy" fees that may kick in when the card is not used within a few months; they may also have fees assessed for checking on the value remaining on the card; lost or stolen card fees; or replacement fees if the card expires by its own terms but you still have value remaining on the card you want to use. These fees must be disclosed to you, so read all materials provided with the card.
What if the retailer I buy a gift certificate from goes out of business?
In some, but not all cases, you may be able to receive some reimbursement for the value of the gift certificate.
If the retailer files for the protection of the bankruptcy court, you should file a document called a "proof of claim" with the court. Include whatever information you have about the value of the certificate, and a photocopy of the certificate or gift card. Bankruptcy allows for the payment of claims depending on assets available.
If a company has announced that it has filed for Chapter 11 bankruptcy and is "reorganizing," the company may ask the court for the ability to honor gift certificates. It may be in the best interests of a company to maintain goodwill if it wants to continue operating, so this request makes good business sense, but it is not always certain that this request will be made to the court.
If a company files for "liquidation" in bankruptcy, through Chapter 7, there may not be assets available to pay off all or even some of the value of consumer gift certificates. Some bankruptcy courts consider gift certificates to be "consumer deposits" under the bankruptcy code, entitled to certain unsecured creditor priority over some other claims, but not all courts consider this to be the case.
If the retailer does not file for bankruptcy, but simply closes, that does not necessarily mean that you won't be able to use your gift certificate. Some businesses file in state court for an "assignment for the benefit of creditors," and that procedure may also provide for an orderly distribution of assets.
Some businesses may otherwise provide for a way to transfer the value of a gift certificate to another location or to someone who buys the customer list.
If a business unfairly took advantage of consumers, the Attorney General's Office may also bring a legal action seeking recovery of the value of unredeemed gift certificates or gift cards.
What types of return policies can a story have?
A Massachusetts retailer can typically have any refund, return or cancellation policy it wants, but that policy must be clearly and conspicuously disclosed to the consumer prior to the conclusion of the transaction. Many retailers provide the disclosure by a posted policy at the register or service desk.
If a return policy is only listed on the sales receipt, that is not considered clear and conspicuous prior disclosure, as you only get a receipt after the sale is completed.
If no return policy was disclosed, goods may be returned within a reasonable period of time.
Restrictions in return policies do not apply to defective goods—goods which cannot be used as intended, such as the toaster that will not toast or a television that does not get a picture. The store is required to give you a choice of a refund, repair or replacement.
Be sure you know the store's return policy, so you can tell your intended gift recipients. Many stores offer "gift receipts" without the price on them so a recipient can return or exchange the gift. You may want to request such a receipt if the store provides this service.
If a retailer is "liquidating," is it safe to purchase products from it?
If a store is liquidating, it may mean that someone is selling off some or all of its merchandise and that they may or may not be going out of business. Ask the retailer what its future plans are and what their return policy is. In addition, you may want to ask for a copy of the original receipt as well for your own records."
Never buy a gift certificate or gift card from a seller saying it is liquidating unless you know what it means — the business may not be there tomorrow, and you may be out of luck.
If you contemplate buying something at a "liquidation sale," do your homework first. Compare prices before you buy, as you may not be able to return purchases. A retailer in liquidation can still have any return, refund, or cancellation policy it wants, as long as those policies are disclosed before the purchase is made. While it may not accept defective merchandise from return, if the store is closed, that policy will not be useful to you.
How can a consumer protect him or herself while shopping online?
Only do business with companies you know, Coakley advised. If you are intent on doing business with a company you know nothing about, research where the company is located and call the local Better Business Bureau to check on their reputation. Consumer's can also check with the Attorney General's Consumer Hotline by calling (617) 727-8400.
Though many Web sites offer secure transactions, it may be safer to order by phone or mail. If you decide to purchase online, you may want to pay with a credit card as it gives you the most consumer protection, including the right to dispute a charge if the item is not as represented.
Check the business's Web site for return policies. If the Web site does not provide information about delivery dates and returns, be cautious about proceeding with the purchase.
Order as early as possible. If it is important to you to get a gift to someone by a particular date, order as early as possible and check the delivery dates specified by the site.
If you are doing business with a company outside the U.S., know how much you are paying. Are the prices stated on the Web site in U.S. or foreign currency? Research contact information for the company. It is especially important to note that even if you are making purchases with a credit card, consumer protections may not extend to purchases made outside of the U.S. The general limit for consumer protections on credit cards is within your state, or 100 mile radius of your home, though some credit card companies will extend those protections — ask first, shop later.
Federal and state laws protect consumers from fraudulent use of credit cards and debit cards. You are only responsible for $50 under state law if your credit or debit card has been used for purchases you did not authorize. Some credit card companies actually provide for zero liability for unauthorized use.
Consumers who have questions about retail laws in Massachusetts or wish to make a complaint against a business should contact the Attorney General's Consumer Hotline at (617) 727-8400. The Attorney General's Web site, www.mass.gov/ago, offers additional tips on retail rights and consumer protections.
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