California court tells Sharper Image gift card holders where to go

It's been a roller coaster ride for consumers trying to figure out what to do with their Sharper Image gift cards.

When the overpriced gadget chain filed for bankruptcy, it declared that it would no longer accept its own gift cards. Then it sort of relented, agreeing to accept gift cards, provided that you bought an equal value of goods with cash. So if you had a $50 gift card, you would have to buy another $50 worth of stuff in order to use it.

Then the California state attorney general's office sought a temporary restraining order, seeking to block the company from requiring people to buy twice as much stuff in order to get what they'd paid for. But the Alameda County superior court refused to hear the case, saying that it didn't have jurisdiction because of Sharper Image's bankruptcy filing.

Check out the Wall Street Journal article (subscription required) for the legal details. Those issues aside, it seems that the consumer protection laws in this area are seriously lacking. People do not buy gift cards with the understanding that there is a possibility they will be stiffed in the way that banks do when they lend money.

Public companies are not even allowed to book a sale from a gift card until it's redeemed for merchandise. Given that, gift card purchases should be held in some kind of escrow account, and not released into the company's general ledger until the sale has been completed. The gift card money should be separate from the rest of the assets involved in the bankruptcy.

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