Retailers in financial trouble should be forced to honour outstanding gift cards in the wake of the Dick Smith collapse, according to Nick Xenophon.
However, the Council of Small Business of Australia has raised concerns the proposal would put an undue burden on small businesses.
The independent Senator for South Australia announced yesterday he intends to put legislation to the Senate that would force external administrators to honour gift cards.
As it currently stands, administrators are able to make a decision whether or not to honour outstanding gift vouchers, with affected customers then able to become unsecured creditors of the company.
The Senator would like companies to keep the funds from purchased gift cards in a separate bank account that would be protected in the event of the business falling into voluntary administration.
Xenophon also wants to change corporation law so directors of a collapsed company are personally liable for outstanding gift cards and deposits.
Dick Smith’s receivers announced last week the electronics retailer would not be honouring outstanding gift cards or deposits.
The move infuriated many customers, who said the decision was “offensive” and “disgusting” considering how many people would have been given Dick Smith gift vouchers for Christmas.
Xenophon said in a statement he hopes to prevent future situations where consumers are unable to use their gift cards when administrators take control of a struggling business.
“The Dick Smith Holdings collapse highlights the lack of protection for consumers when it comes to gift cards and deposits paid,” 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.”
However Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany the proposed changes could make life more difficult for small business owners if applied to the smaller end of town as well as large corporations.
“There needs to be a threshold here,” Strong says.
“Gift vouchers from hairdressers or little shops are managed in a different way to gift vouchers elsewhere. Normally, it’s a customer relationship, but with the big end of town it’s really about the sales. I know plenty of small businesses that honour gift vouchers that are way out of date.”
Strong says while he supports the need to crack down on the “big end of town”, the last thing SMEs need is added complexity to their day-to-day operations.
“We’ve got enough things going on,” he says.
“The big end of town gives gift vouchers quite a bad name. The reality is a lot of people pay cash for their gift vouchers, and a lot of little businesses go out of their way for people to use their gift vouchers because they want people in their store. So let’s target the big end, but leave the little fellas out of this.”
SmartCompany contacted Nick Xenophon but did not receive a response prior to publication.
Broede Carmody is a former senior SmartCompany reporter. Before this, he was a co-editor of RMIT University’s student magazine Catalyst.
