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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