Calls for law reform to solve Dick Smith gift card debacle

ARE you frustrated with Dick Smith’s gift card debacle? This could be the way to secure refunds - and stop it from happening again.

Dick Smith customers are frustrated by the administrator’s refusal to honour deposits and gift cards. Todd Sharpe was refused a refund for a product he was misinformed about.

CALLS are mounting for law reform to protect gift card buyers from a corporate collapse like the one that has rocked Dick Smith.

After thousands of Australians’ Christmas presents were ruined by the electronic retailer’s voluntary administration, many have been left wondering why the chain is allowed to keep selling goods while refusing to honour gift cards or deposits.

Before Dick Smith shut down visitor posts on its Facebook page, many commenters queried how this could be legal, arguing that they had essentially already paid for the Kindle, iPad or television they had planned to buy.

Some were so annoyed that they argued that they should be able to walk into stores and grab a product to the value of their gift card from the shelf, and do a runner.

But the reality is different; under Australian consumer law, gift card holders have limited rights when a company goes under.

Thought gift cards were a great Christmas present? You thought wrong.

In the case of a corporate collapses, gift card holders are at the mercy of the receiver appointed to run the company, in this case Ferrier Hodgson.

Unless you are able to secure a chargeback on your credit card through the bank, you’ll have to get in line with all the other unsecured creditors — and be quick, because the first creditors’ meeting is this Thursday.

But Independent Senator for South Australia Nick Xenophon has outlined a bold rescue plan that could get gift card buyers’ money back a whole lot faster — and prevent a repeat of the debacle.

Mr Xenophon called for urgent law reform to force external administrators like Ferrier Hodgson to honour gift cards, and make the directors of companies that collapse personally liable for the value of gift cards purchased or deposits paid for goods.

And he argued that funds used to purchase gift cards, or deposits paid for goods, should be required by law to be quarantined in a separate account, to be held in trust for the customer.

This would mean that the customer would always be able to get their money back in the event of a corporate collapse.

“The Dick Smith Holdings collapse highlights the lack of protection for consumers when it comes to gift cards and deposits paid,” Mr Xenophon said.

“These proposed reforms, which will be contained in legislation I will be introducing into the Senate next month, will finally give consumers the protection they deserve.

“The reforms, if passed, will also have the effect of strengthening consumer confidence in gift cards which has been shaken with this collapse.”

Independent Senator Nick Xenophon at a press conference at Parliament House in Canberra, Wednesday, Dec. 2, 2015. A coalition of senators has today confirmed it will not support the government's proposal to change the structure of superannuation boards. (AAP Image/Mick Tsikas) NO ARCHIVING

Mr Xenophon also said that the terms of reference for the inquiry to the Senate Economics References Committee would include a “forensic examination” of the conduct of private equity firms during corporate takeovers.

“The Dick Smith stores collapse puts a spotlight on the role of private equity firms in takeovers where the long-term sustainability of a business is put in question by virtue of the structure of the deal that was done,” Mr Xenophon said.

He questioned whether current laws, accounting standards and powers of corporate and consumer watchdogs were adequate in monitoring such deals.

Meanwhile, a local councillor in Queensland has launched an online petition calling on Ferrier Hodgson to “act like true Australians, stop acting like Scrooge and honour the Christmas gift cards received in good faith by thousands of Australians”.

Ipswich councillor Paul Tully said Ferrier Hodgson had embarrassed those who gave and received gift cards over Christmas.

“The receivers have acted in a cavalier and unreasonable manner and should hang their heads in shame,” he said in a statement.

Almost 350 people had signed the petition at noon on Monday.

Marie Hodges said she was disappointed she could no longer use a Dick Smith voucher she had been given to buy a new Kindle.

“The people who bought this card did so in the hope I could have something I really wanted. Now it’s useless,” she said.

Woolworths and Coles have offered to exchange Dick Smith vouchers bought at their stores.

— With AAP.

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