- By Insights@Blackwall
- Posted April 14, 2016
Where’s my money?
Gift vouchers are in the news again after the appointment of receivers and administrators to retailer Dick Smith. The company’s receivers, from Ferrier Hodgson, say that gift vouchers will not be honoured and deposits won’t be refunded. The ABC’s Dominic Knight argues that it’s not so simple and NSW Fair trading says “watch this space”.
The receivers are right
Unfortunately for Mr Knight and for the many recipients of Dick Smith vouchers for Christmas, the receivers are right. Vouchers are essentially just a debt, like any other unsecured debt. And when a company can’t afford to pay its debts, the law has to provide a system for determining who misses out.
Just like cash?
Knight argues that vouchers should be treated like cash: if they “won’t be replaced if lost” surely that means “they should also be treated like cash in that the money can’t magically disappear just because the person you got it from has financial difficulties.” But this mistakes the very nature of cash.
In fact a banknote is exactly like a voucher, and a debt, but it’s a debt of the bank that issues the banknote. If the bank (usually a government reserve) runs into financial difficulty, they won’t be able to honour the banknote either. Of course if you trust the Reserve Bank more than a retailer, that makes a banknote more valuable than a voucher.
Other avenues for voucher holders
If you have a gift voucher, or placed a deposit with Dick Smith (or another similar retailer in the same position) you might still have options available to you. The receivers have indicated they will try to sell the business as a going concern. If it sells, the new owners may (or may not) decide to honour vouchers in order to protect the business reputation. Some resellers, such as the recently launched Prezzee app have promised to allow exchanges.
If you (or someone else) paid for the gift voucher or deposit using a credit card, there is a good chance you (or they) can get money back through the bank that provided the card: most have a “chargeback” as part of a system designed to encourage use of credit cards. Although occasionally there can be fees involved, the CBA says it will not be charging fees for Dick Smith customers.
Some ask why voucher proceeds aren’t kept in trust pending their use. But if you were running a business, would this sound like an attractive option? Vouchers are a convenience for consumers, and setting up trusts to keep voucher proceeds would cost businesses time, effort and money. And what happens if (as is always the case for a small number of vouchers) the cash isn’t spent? How long must the business keep the money on trust? This is of course the reason vouchers have expiry dates – so retailers do not need to keep the associated liabilities on their balance sheet forever.
The system must balance the rights of consumers against those of businesses, and if we want to be able to use vouchers, we need to make sure it is not too difficult for retailers to provide them. If the law is to require funds to be kept on trust, there must be a cheap, easy way for business to comply. There would have to be time limits placed on the trust obligation. Preferably a government-maintained fund would be made available in which to keep funds so that businesses are not required to run trust accounts and incur audit costs
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