In February, when the
popular San Francisco-based consumer-goods company The Sharper
Image filed for Chapter 11, planners who used the firm’s gift cards
as rewards, as well as the recipients of the cards, were left in
the lurch.
Initially, the company suspended any
and all redemption of its cards. At press time, it had resumed
redemption on two conditions: Recipients must redeem the card in
full in one transaction, and they must purchase an item that costs
at least double the value of the gift card.
What can planners or recipients recoup
if gift card retailers go bust? According to George B. Delta, Esq.,
a Vienna, Va.-based attorney and counsel to the Incentive
Federation Inc., not much, since current bankruptcy law states that
gift cards do not have to be honored, even if the issuing companies
would like to do so. “A gift card is an IOU, basically,” Delta
said. “It’s not secured by anything.”
But there are a few ways planners can
protect the value of their gifts. Leverage Inc. (www.leveragecard.com), a new Irvine, Calif.-based
company, lets users swap out gift cards, including Sharper Image’s,
for another of equal value from more than 200 companies, for
free.
Leverage, which lets users organize,
buy and earn interest on gift cards, also has launched a bankruptcy
insurance program for gift cards purchased from its website. “The
policy states that the full value of a card can be exchanged for
any card we sell,” said Leverage CEO Mark Edward Roberts.
Furthermore, Leverage sends out alerts
to members when rumors of a possible bankruptcy start swirling.