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FCA urged to protect money held on gift cards

FCA urged to protect money held on gift cards

Category: Money

Updated: 30/08/2013
First Published: 30/08/2013

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Government has been urged to regulate the gift card market in order to protect consumers from losing money when a company goes under.

Currently, the vast majority of consumer funds held on gift cards are not kept in a separate account to the retailer's own funds.

This means that if a company goes into administration, its administrators can refuse to refund any money on gift cards.

Yet Prepaid Financial Services says the banking regulator, the Financial Conduct Authority (FCA), could make it a requirement for retailers to place consumer funds with over 30 regulated E-Money License Institutes (EMLIs) in the UK, thereby treating gift cards as financial products under EU law.

This would also mean that retailer and consumer funds could be separated, and consumer funds protected if the company goes into administration.

The UK Gift Cards and Vouchers Association estimates that the gift card market is worth £4.74 billion

The call for further regulation comes as the future of many leading household names on the high street remains uncertain.

Companies that have faced financial difficulties or even disappeared completely over the last few years include:

  • Republic,
  • Habitat,
  • Jane Norman,
  • Woolworths,
  • Comet,
  • JJB Sports,
  • Game,
  • HMV,
  • Blockbuster.

When the fashion-retailer Republic went into administration just after Christmas 2012, 78,000 consumers lost all their money held on its gift cards.

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