Ask LH: What Happens To My Vouchers When A Company Goes Under?

Ask LH: What Happens To My Vouchers When A Company Goes Under?

Dear Lifehacker, A question during Consumer Power Week: is there anything I can do when I’ve got a product or voucher from a company that has since gone broke? I have been hit by companies telling me “Sorry, but we can’t honour that” twice in a row.

Picture by Mark Metcalfe/Getty Images

A while back I was given an ebook reader for my birthday. It really wasn’t me so I wanted to return it. Unfortunately it had been purchased at Borders and when I tried to return it, they told me that they couldn’t give a refund because they were going under but they could offer an exchange. There really wasn’t much else in the store that I wanted, but I couldn’t be bothered arguing so I grabbed a Smartbox voucher for a massage at a local salon. However, when I recently tried to book my massage I was told “Sorry, we can’t honour that voucher because Smartbox have gone bust and aren’t paying out for the treatments. I tried to contact Smartbox but their phone rings out and they don’t answer email. Smartbox in the UK is still operating but they won’t answer me either.

So my question is: can companies really take your money for a voucher and then, when you try to cash it in, just say “Sorry” and keep the money?

I Need A Massage

Dear INAM,

You’ve had an unfortunate run of bad luck. Unfortunately, in consumer law terms, there’s not much you can do. Since a gift was involved, you’re not out of pocket, but that doesn’t make it less annoying.

There are actually two separate issues here. The first is that while Borders wasn’t prepared to give you a cash refund for the unwanted ebook reader, it wasn’t actually obliged to give you a refund or an exchange at all. The law on this point is perfectly clear: you aren’t entitled to a remedy if you “simply change your mind or decide you do not like your purchase”. So while you might not be happy with the outcome in retrospect, you actually did better than might be expected (especially in a closing store which has no particular reason to try and build customer loyalty).

The voucher situation is more unpleasant. If a company goes into liquidation or receivership, people holding vouchers or gift cards invariably find that they’re at the bottom of the food chain. Once a business goes broke, any assets it has will be used to pay off existing creditors, which includes people holding gift vouchers. However, as a voucher holder, you’re an unsecured creditor. Secured creditors (typically banks) and employees get first dibs on any cash that’s available. The chances of anything being left for buyers are extremely low.

We’ve pointed out before that when it comes to gift cards and vouchers, the power resides with the seller, not the recipient. You pay cash for a gift card, but what you end up with is less flexible and less protected. There have been hints that the law might improve in this area, but I’m not holding my breath.

The lesson? If you have a voucher or gift card, use it quickly rather than hanging around.


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  • Borders may have been doing a nice thing, but INAM has actually ended up a lot worse off than if the exchange by Borders was refused, as he / she would still have an e-book reader they could at least sell on eBay.

  • Better yet give cash……….never runs out, not tied to any particular vendor etc etc. Vouchers are the biggest con job I have seen for a while. Why would they even have an expiry after all THEY HAVE YOUR CASH! Makes me mad every time I think about it (as if you can’t tell)

    • Totally agree. I get so fired up about this issue. Give cash! I received a VISA gift card recently which seemed great at first because I was able to spend it anywhere. Then I found out it cost my poor grandmother $6 just to purchase the card and could not be recharged. What a joke!

  • I worked for a large not to be named department store. We had over $100k in unclaimed vouchers going back a few years. However customer service came first, if somebody came in with an card that expired 10 years ago and still had credit to use it would always be accepted.

    • Not sure why you’re not naming them but it sounds like Myer. Paper vouchers issued from as old as 1998 are being redeemed in my experience, so unless Myer go bust then they’re still handy!

    • I have one also Danny which I discovered is no longer redeemable due to them going under – sucks!! The have not been answering phones for months so Im not sure when they went under.

      • Herewith some info you might want to look at:

        The company went down leaving behind nearly $5(M) of bad debts. To my experience (as an Insolvency/Forensic accountant) the bust seems to be well planned, having no trace of funds in the company and the director of the company being represented by his solicitor since the very beginning…class action would be a good solution in the US in cases like this…unfortunately it is not in Australia due to laws and regulations in place.
        The liquidator will almost likely wrap it up quickly because of a lack of funds and the difficulty of collecting all the proofs/exhibits to eventually get the director (or eventual shadow directors) for fraud, should this be the case. Moreover if fraud was to be proven the director would then become personally liable, although, even in this case, the fraudolent director might have all of his assets (or even the “booty”) secured into an anonymous Trust (or trust structure overseas), which (then again) would leave the creditors a very limited range of action due to poor lesgislation with regards to trusts in insolvency/fraud cases.
        on top of all of the above remember that the shareholders would still have their liability limited to their share nominal value and therefore consumers/common-people are ultimately the ones who will bare the cost of this liquidation. My comment is limited to this old latin saying: “homo homini lupus est”.

        My personal belief is that there is something really wrong in the laws of all countries worldwide, which goes against the principle of fairness, good-ethics and responsibility and that wrong thing is exactly the artificial construct of having some entities limiting someone’s liability. Remember even companies are run by human beings…sometimes, whether intentionally or not people make mistakes: it is never just to have an individual avoid his responsibilities for what they caused, regardless it was intentional or not.

  • Boycott gift cards.

    Seriously, what idiot wants to give an interest free loan to a multi-million/billion dollar company, that they don’t even have to pay back under some circumstances.

    Gift cards are fools’ money, and those companies are laughing all the way to the bank.

  • I was given a Coles gift card. I used the gift card to buy smokes – something I would have baught anyway. Then I used the money I saved to buy myself something I actually wanted – a new hard drive.
    But I had to listen to the Coles customer service manager loudly tell everyone within earshot how she thought that gift cards shouldn’t be able to be uesd to purchase smokes.

    My answer that shut her up was “Then take the time to choose a real gift instead of just a gift card”.

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