Comet administrator Deloitte has suspended the use of gift vouchers at the stores. Retail Week takes a look how much vouchers are really worth in administration.

Why are we talking about this?

Following the collapse into administration of Comet last week, administrator Deloitte said that vouchers cannot currently be used in stores, which leaves some customers with more than £500 of unredeemable coupons.

How can they do that?

Andrew Johnson, director general of the trade body UK Gift Card & Voucher Association, says that as Comet is in administration, Deloitte has no legal obligation to honour or pay out the value of the gift voucher to consumers due to administration regulations.

Is it general practice?

Johnson says the absence of regulations guaranteeing the value of gift vouchers is “a real issue” with administration. In previous instances, he says that some administrators have honoured gifts vouchers up to a certain point in time, such as with Woolworths, though in some cases consumers may not receive the full value of the voucher.

In addition, even if retailers take precautions to set aside money received from gift vouchers, the administrator still has the power to prioritise other outstanding debts and use the money elsewhere. Johnson says with Zavvi, certain gift vouchers bought during a specific period were protected by a ring-fenced fund. However, he says even if funds are ring fenced, “all monies are in control of the administrator and it could still choose not to use the funds to honour gift vouchers”.

However, he believes previous examples are “almost irrelevant” as different administrators and different circumstances dictate going forward.

What does it mean for customers?

Johnson says it is very uncertain whether consumers will receive the value of the gift vouchers, as the decision is entirely down to Deloitte, which is still reviewing the situation.

In terms of being able to use the voucher in the foreseeable future, consumers could legally lose the value of those vouchers entirely. He explains: “In theory they [the outstanding gift vouchers] will go on the creditor’s list with the administrator but they wouldn’t rank particular high on that list. If the administrator doesn’t accept them, potentially consumers will lose the value on the gift vouchers.”

Furthermore, if Deloitte finds a buyer for the retailer, the gift vouchers may not necessarily be honoured by the new owner. He says if a buyer doesn’t buy the whole of Comet then they may well be within their rights not to accept the gift vouchers that were sold by the old company.

Could this put consumers off buying gift vouchers elsewhere in the future?

With many retailers at risk of going into administration, one of the concerns of the UK Gift Card & Voucher Association is that shoppers may be dissuaded to buy gift vouchers if there is a risk they may not be honoured. However, Johnson points to multi-choice gift cards and vouchers as another option for shoppers and retailers, explaining: “If one of the retailers which is part of the multi-choice programme is unable to continue, there are other options, while the money [from the gift voucher] is also held by a separate company, ie the issuer of the multi-choice voucher.”