Flying the Empty Skies Part III – I’m a Consumer, Don’t I Have Rights?

Posted April 25, 2008 in Consumer Law by

As a consumer, you have rights, and power. Specifically, the power of the almighty dollar. However, what happens when the company has your dollar, and goes out of business before giving you what you paid for?

Legally speaking, those who held tickets on the bankrupt airlines or gift cards to Sharper Image may have a claim for the money they spent, but recovering even a dime of that money is probably going to take more work than it’s worth. Say you take the time and effort and actually submit your claim to be added to all the others in the bankruptcy proceeding. Even if your claim is acknowledged, you may see little to no money for it. A large part of the problem is that a company goes bankrupt precisely because they don’t have the money to pay everyone they owe. If they did, they’d still be in business. During the bankruptcy process, anything that the company owns (land, buildings, equipment, etc.) can be sold to raise funds to pay some of what is owed. It is very unlikely, though, that this will provide enough money to cover every debt.

If you feel you have a claim and have the stomach to ride out the process, you may still want to go for it. This is especially true for the airline tickets if you paid by cash or some form of check. If you paid by credit card, there is another option available to you which I will discuss in my next posting.

When gift cards suddenly become worth less than the plastic they’re printed on, the consumer is often out of luck. For those of you holding Sharper Image gift cards, however, there is some good news. The Sharper Image has issued an advisory that gift cards purchased before February 19, 2008, can be redeemed online. But there is a catch: you have to spend twice the amount of the gift card. As they explain it, if you have a gift card for $25, you must spend $50 on merchandise in order to get the $25 credit. Customers who don’t wish to do that can opt to become a creditor in the bankruptcy proceeding or hold onto their gift cards in the hope that they might be honored in the future. Neither option guarantees the card holder will receive anything.

So how can you protect yourself ahead of time? Here are some tips:

  • Do your homework. The Federal Trade Commission’s Bureau of Consumer Protection exists to protect consumers from fraudulent, deceptive, or unfair business practices and to educate them about their rights and possible dangers. Checking with them and the Better Business Bureau is a great way to determine the legitimacy of offers or companies.
  • Hedge your bets. Worry over losing money spent on gift cards is driving some consumers to use services such as those offered at www.leveragecard.com – a place where you can buy and then trade gift cards.
  • Pay by credit card. Many credit cards offer extra protection after you’ve made your purchase. I’ll discuss one of these options in my next posting.

As far as airlines go, it still feels a little bit like playing a game of Russian roulette. Pick your airline, buy your ticket and pray that everything goes according to plan. Or just ask a flight attendant. Two days before ATA quit flying, one of the flight attendants on my friend’s flight was making dark predictions about the future of her airline. Next time my family and his will take such warnings very, very seriously.

Next time: Flying the Empty Skies IV: To Charge…and to Charge Back

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