SCHUMER: TOYS R US IS IN SERIOUS THREAT OF CLOSURE & MAY SOON SHUTTER, LEAVING CONSUMERS STUCK WITH USELESS GIFT CARDS; SENATOR SAYS COMPANY MUST ALLOW CONSUMERS TO TURN THOSE GIFT CARDS BACK INTO CASH BEFORE IT’S TOO LATE; MANY CONSUMERS GIFTED TOYS R US CARDS THIS PAST HOLIDAY SEASON & SHOULD NOT BE LEFT HOLDING THE BAG IF THE DOORS CLOSE AND SHELVES GO BARE
Schumer-Backed Rule Forced Retailers To Honor Gift Cards For Five Years—But The Facts Show Toys R Us May Not Be Around That Long & That A Public Liquidation Process Has Begun; This Would Mean Toy Store Gift Cards Grow More Useless By The Minute
Senator Demands Toys R Us Allow Consumers To Turn The Gift Cards They May Have Just Purchased Or Received Back Into Cash; Urges FTC To Take Immediate Look To Ensure No Laws Are Being Violated & That Consumers Have Time To Cash-Out Their Gift Cards
Schumer: Would Be A Sad Toy Story If Consumers Got Gamed By Toys R Us Closure
On the heels of swirling reports concerning the future of retailer Toys R Us, U.S. Senator Charles Schumer has announced today that he is urging the Federal Trade Commission (FTC) to step in amidst very real and serious concerns for the company’s longevity, particularly as it relates to gift cards purchased by consumers. Schumer is asking the FTC to take an immediate look into the company to ensure no laws are being violated as a rumored liquidation process ensues, and most importantly, to ensure consumers have time to get cash back for unused gift cards. Schumer also urged the FTC to publish consumer education around the difficulties surrounding gift card redemption once a retailer enters bankruptcy.
“With the entire Toys R Us operation at risk of shutting its doors for good, I am urging the company to redeem outstanding gift cards for cash so they are not as worthless and unwanted as a lump of coal in a stocking,” said U.S. Senator Charles Schumer.” This past holiday season, buoyed by fresh debt financing, Toys R Us gave an ‘all clear’ to consumers, selling toys and gift cards as part of normal operations. However, it appears the music is about to stop for the iconic retailer and consumers could be left in the lurch when it comes to the loss of a whole lot of money in unspent gift cards. It would be a sad toy story if those same consumers got gamed by a Toys R Us closure and left holding useless gift cards that were intended to bring a smile to the face of a child. That is why it is critical for the FTC to take an immediate look at how the company is handling this unique situation and determine just how many gift cards are out there. Consumers deserve the chance to turn their Toys R Us gift cards into cash before it is too late and the FTC can help ensure any laws to help this happen are being followed in real time.”
Schumer, today, noted public reports that showed prior to the holiday season, Toys R Us acquired Debtor In Possession (DIP) financing that carried the company through the holiday season, allowing them to remain open and sell toys and gift cards. However, that financing soon ran out and required another influx of cash the company has not been able to secure. Schumer said the latest developments spell trouble for consumers who may have just purchased gift cards and are now faced with the prospects of losing out on the value of their investment.
“While many are fond of and share great memories inside these stores, you don’t need to have the neck of a giraffe to see that Toys R Us is having issues that could translate into money losses for innocent consumers. That’s what we want to head off at the pass by urging forthright planning,” Schumer added.
Moreover, it was Schumer who championed the law that protected consumers from expiring gift cards in the first place. Schumer was an early supporter and original cosponsor of the Credit CARD Act of 2009, which created new protections for gift card users to prevent a number of frequently used abuses, including hidden fees, vague terms of service, and early expiration dates. Under the rule, gift cards must be good for at least (5) years after their purchase. Schumer, today, said that he has called on the FTC to closely and expeditiously review the situation because all signs point to ominous when it comes to Toys R Us being operable five years from now, and consumers holding gift cards deserve the opportunity to rectify their gift card purchases with the company before it is too late.
Schumer’s letter to Acting FTC Chairwoman Maureen Ohlhausen appears below.
Acting Chairwoman Maureen Ohlhausen:
Thank you for the work you do to protect consumers. I write today to draw your attention to an important issue that has the potential to seriously harm consumers throughout New York and across the country.
As you may know, last September, retail chain Toys R Us announced that it had filed for bankruptcy amidst a $5 billion dollar debt load. Since then, its economic situation has only continued to worsen, leading to clearance plans for several of its stores. Furthermore, news reports as recent as yesterday, are stating that the chain is moving even closer to ending its operations for good. According to those reports, the chain is preparing to fully liquidate its operations – a step that would result in the shuttering of all 800 Toys R Us stores in the U.S. This devastating news is sure to disappoint countless families throughout the country and consumers who solely rely on Toys R Us for their toy products.
Compounding what will surely be a sad loss for U.S. families is the fact that many consumers may have to forgo the use of their Toys R Us gift cards. To date, Toys R Us has not stated what will happen to the remaining gift card balance for users after liquidation, nor have they indicated that they will provide consumers with an opportunity to trade that balance for a cash value. This could mean countless American consumers are left with very little time to use their gift cards before their local stores close. I worry that without the certainty of a pathway to restore the funds or ample time to utilize the balance, consumers will forfeit the opportunity to use their gift cards before they are voided. This would be a particularly frustrating blow for those individuals who just received their gift cards, especially around the recent holiday season.
In order to guarantee that consumers are robustly protected throughout this transition, I am requesting that the Federal Trade Commission (FTC) provide a close and expeditious review of this entire process to ensure that no laws are being violated. I also ask the FTC to do what it can to ensure that Toys R Us is taking every possible step to honor its existing terms of service for its gift cards. In order to educate consumers for future scenarios, I urge the FTC to conduct consumer education to inform individuals of the difficulties around gift card redemption for retailers undergoing bankruptcy, and advise consumers of when they must promptly redeem their cards. It is critical, in the case of Toys R Us or other bankruptcies, that consumers have a full opportunity to take advantage of their gift cards before stores close.
Thank you for the work you and your agency do to protect American consumers. I look forward to working with you on this issue.
U.S. Senator Charles Schumer