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Consumers’ rights – what to do when a business closes

The following information was discussed by Attorney Whitney Hughes on the January 27, 2009 edition of Legal Briefs on KDKA's Pittsburgh Today Live.

Lately it seems all we hear are stories of businesses that are closing due to the troubled economy. While it may be tempting to take advantage of what are advertised as “rock bottom prices,” there are almost always hidden risks. Below are some common questions and some tips in case you’ve purchased something from a now defunct retailer.

One of my favorite stores in the mall is having a liquidation sale. Am I safe buying things now?

It depends on why the store is liquidating. When a store liquidates it may or may not mean that it will be going out of business. It could mean that it will be selling off some or all of its merchandise and that it plans to stay open. Ask the retailer what its future plans are and what its return policy is. You should also ask for a copy of the original receipt as well for your own records.

Unless you have a definite answer for what “liquidation” means, do not buy a gift certificate or gift card from a retailer. If the business closes the next day, you may be out of luck.

Making a purchase at a "liquidation sale" is like anything else—do your homework first. Compare prices before you buy, because you may not be able to return your items. A store in liquidation can still have any return, refund, or cancellation policy it wants, as long as those policies are disclosed before the purchase is made. Again, keep in mind, stores ARE NOT required to make refunds or give exchanges.

I have gift cards from a store that has filed for bankruptcy protection and is “reorganizing.” Are these cards worthless now?

Legally, consumers who hold gift cards become unsecured creditors of the company. That means they are second to last in line to get their money back, just ahead of shareholders. If the store stays in business as it reorganizes, it can honor gift cards to keep customers happy as long as the company can afford it and gets court approval. But if the store closes, you probably will end up losing the money.

Bottom line is, if you have gift cards use them right away.

I put a large deposit down on furniture and then financed the rest. The furniture is supposed to take 6-8 weeks to be delivered, but now I hear rumblings about the store going out of business. What should I do?

The most important thing you can do is to try to limit your potential losses before trouble strikes. If you paid the deposit with cash, debit cards, or checks you are an unsecured creditor. If you paid with a credit card, you are able to contact the credit card company and either stop payment or dispute the charge because the product was not delivered.

Document all transactions, keep all receipts, and keep records of employees with which you have spoken. If the store does close, file a complaint with the state attorney general. Keeping accurate records will assist investigators and support any legal claim you may have.

I have both a manufacturer’s warranty on a television I purchased as well as a service policy from the store that guarantees a replacement. The store is closing. Am I out of luck if the television breaks?

Your manufacturer’s warranty is safe. It won't be affected. If the “service policy” is more of an extended warranty that is backed by a third-party company you may also be safe. The problem comes when you have an extended warranty or a service contract that is backed by the retailer. Unfortunately if that is the case—you’re probably out of luck.

If the product does break, you may be able to exchange it during a liquidation sale, if it is a store that plans to stay open through bankruptcy and decides to keep its pre-bankruptcy return policy to keep customers happy. Worst case scenario, if that is not the case, faulty merchandise could go back to the manufacturer.

I have a balance on a credit card from a bankrupt store. Do I need to pay the bill?

As long as you received the goods or services you purchased, you must pay your bill.

Many store credit cards are Visa or MasterCard cards, which are issued by banks. They will report you to credit agencies and hire bill collectors if you fail to pay.

TIPS TO PROTECT YOURSELF

Do your homework. Research the business to make sure it’s reputable and see how long it has been in business. Check with both the Attorney General’s Office of Consumer Protection and the Better Business Bureau to make sure there have been no complaints made.

Limit the amount of money you’re paying up front and use a credit card if possible.

Keep accurate records of all deposits made, financing terms, and invoices.

Trust your instincts. If a store requests that you make a large deposit or continually gives you wrong information regarding when your items will be delivered, act quickly to protect your rights. You do not have to wait until a bad experience becomes a crisis before seeking help.

To file a complaint against a business, contact the Pennsylvania Attorney General’s Bureau of Consumer Protection at 412-565-5135.

To speak with an attorney regarding consumer issues, contact the Allegheny County Bar Association Lawyer Referral Service at 412-261-5555.