Gift Cards: What happens when businesses close?

In 2013, a federal judge ruled holders of Borders gift cards would get nothing after the book company filed for bankruptcy. The $210 million worth of outstanding gift cards were worthless.

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Portland, Ore.— Gift cards are a popular gift, but they come with a risk. If the business closes its doors- your gift card could be worthless.

“It’s frustrating,” said Janiene Karlbom of Gresham. “I think they should give me my money back.”

Karlbom bought three gift cards from The Original Taco House worth a total of $90. She gave the gift cards to family members as Christmas gifts.

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On December 31, The Original Taco House suddenly closed both Portland locations.

“We sincerely thank and appreciate all of our dedicated customers,” said a note posted on the front door.

Days after closing, owner Jeff Waddle told KGW he wasn’t able to make the family-owned restaurant work financially after his brother and business partner passed away. Waddle said he promised to reimburse customers who purchased gift cards.

Three months later, customers are still waiting for a refund.

Karlbom has compiled detailed records of her emails and phone calls to The Original Taco House inquiring about gift card refunds.

According to her notes, Karlbom spoke by phone with a woman named “Jennifer” from The Original Taco House at 8:51 am on January 11. The woman assured Karlbom a refund check would arrive within three weeks.

“I’ve heard nothing since January 11,” said Karlbom. “It’s frustrating.”

Other customers posted similar complaints online- including Facebook.

“I feel robbed,” said Michell Ericksen of Gresham. She purchased a $50 gift card for The Original Taco House for her mother.

“It’s upsetting,” said Betty Patterson, a longtime customer at the restaurant. “If they were to open up again tomorrow, I don’t think I’d come back.”

The Original Taco House owner Jeff Waddle could not be reached for comment. KGW sent emails, called his phone, visited his home and sent messages to relatives via social media.

“You would expect better than that,” said Karlbom, who has been a customer of The Original Taco House for nearly 30 years.

The Better Business Bureau warns customers holding gift cards have little recourse if a business closes.

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“Unfortunately, the consumer may just be out of luck,” said Stephen Mayer, spokesperson for the BBB.

Oregon law sets a limit on when gift cards can expire and what fees a company can charge, but says nothing about people getting their money back when a business closes.

Advocates suggest consumers use gift cards right away, purchase gift cards with a credit card for additional protection and evaluate the risk before buying.

“Keep in mind the financial stability of the company that you are going to buy a gift certificate or gift card from,” said Mayer of BBB. “Are they in good shape or are they in trouble?”

If a company goes into bankruptcy, there is a chance you may be able to recovery your money in court, but it is a long shot. You’ll be waiting in the back of the line, behind other creditors.

In 2013, a federal judge ruled holders of Border books gift cards would get nothing after the company filed for bankruptcy. The $210 million worth of outstanding gift cards were worthless.

The website has gift card watch list. The website keeps a list of retailers in bankruptcy and suggestions on what you can do with your unused gift cards.

The Oregon Department of Justice provided the following tips for purchasing gift cards.

  • Verify before you buy. Gift cards often come with a concealed personal identification number (PIN). When buying a gift card, make sure the coating over the card’s PIN has not been scratched off. Have the cashier verify the card balance before you pay.
  • Protect your purchase. Get a receipt, register the card and check the balance to make sure no unauthorized purchases are made. Report suspicious purchases to the retailer or issuer as soon as possible.
  • Be careful online. Auction websites may offer gift cards, often for a lot less than face value. While these seem like a good deal, there have been many reported instances of fake or fraudulent gift cards sold on these sites.
  • Check for expiration dates. Unless they were sold at a discount, gift cards cannot have an expiration date. If the gift card was sold at a discount, the card may state an expiration date, but it must be at least 30 days after it was sold.
  • Be aware of the retailer’s financial status. If a merchant declares bankruptcy or closes a local store before a gift card is used, it may render the card useless regardless of the expiration date.
  • Get your money’s worth. State law makes it illegal to use inactivity, maintenance, service or other fees to reduce the value of a card. As of January 1, 2012, Oregonians are allowed to redeem most gift cards with a balance of $5 or less for cash.
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