£4bn gift card market faces crisis

The gift card market is facing a major crisis of confidence, triggered by fears that the perilous state of the British retail sector could soon render worthless millions of pounds in vouchers from high street brands.
The move follows reports that there are up to £10m worth of HMV gift cards which cannot be spent. And now the trade body which represents the £4bn industry has joined calls for greater consumer protection when retailers go bust – and is even demanding a change in the law.
UK Gift Card & Voucher Association director general Andrew Johnson said: “Administrators are bound by our code to accept vouchers but this is not a legal requirement. We need stronger legal powers to protect consumers and ensure vouchers are still accepted.”
There have even been accusations, made by Conservative backbench MP Sir Tony Baldry, that HMV was committing theft by continuing to sell vouchers when it must have been aware that “there was little prospect of those vouchers or gift cards ever being redeemed”.
Along with HMV’s £100m, Jessops is said to have £800,000 in unspent vouchers, while JJB Sport had £1.4m and Peacocks £750,000.
Some beleaguered retailers have managed to persuade their administrators to accept vouchers – most notably Comet and JJB Sports – but there is no legal precedent. Blockbuster, which also went into administration this week, has said it will continue to accept gift cards.
Johnson claimed that public pressure could force the administrators to reverse their decision and honour the vouchers. The same team of Deloitte administrators started accepting Comet vouchers following publicity about a four-year-old cerebral palsy sufferer unable to buy an iPad with vouchers from the electrical retailer which collapsed before Christmas.
And shadow business secretary Chuka Umanna said: “It is totally unacceptable. HMV, like Comet, needs to strain every sinew to make sure their vouchers are redeemable.”
In the meantime, consumers are being urged to use their credit cards to buy vouchers in the future as they will at least have some recourse should the retailer fall into administration.