House of Fraser customers' anger over invalid gift cards as retailer remains silent

'What a shabby way to treat customers,' says one shopper as voucher refused by store

House of Fraser customers have expressed anger at the retailer’s silence after stores refused to accept gift cards bought before a takeover by Sports Direct.

Mike Ashley’s Sports Direct bought House of Fraser for £90m in August after the struggling department store chain collapsed into administration. The deal saved House of Fraser but left creditors nursing big losses and now customers fear they too may be left out of pocket.

“What a shabby way to treat customers,” tweeted Joe Cadogan who visited House of Fraser’s Dublin store. “So disappointed yesterday. Cost me tolls and parking to get there only to be told my voucher would not be honoured in your store.”

Thousands of shoppers are thought to have gift cards received as presents or in lieu of refunds but they are no longer valid.

Sports Direct has said it will issue replacement gift cards but it has not provided details as to whether these will be of equal value.

Administrator EY said gift card holders will be considered along with House of Fraser’s unsecured creditors, meaning they may get back far less than face value.

EY said: “Customers can submit a claim against the HF Stores Realisations Limited (formerly House of Fraser (Stores) Limited).

“However, this will be treated as an unsecured creditor claim and unfortunately they will only receive a very modest recovery against the amount claimed.”

Most of the £90m paid for House of Fraser was used to pay back secured creditors such as banks. Unsecured creditors, including gift card holders, are last to get any money back, meaning they will likely receive as little as 1p for every £1 owed.

Sports Direct does not have a legal obligation to pay creditors money owed before the buyout because the debts are part of the administration. However, it can choose to honour the debts as a gesture of goodwill.

A statement on the company’s website says: “The business was purchased out of administration for a cash consideration. As a result of this process Sports Direct has no liability to customers in possession of existing gift cards and vouchers.

“However, we encourage these customers in possession of gift cards and vouchers to send them into the House of Fraser head office at Gift Cards, 27 Baker Street, London W1U 8AH, whereby replacements will be issued.”

Those who have bought a gift card for £100 or more with a credit card may be able to recover the money from their card provider under the Consumer Credit Act.

Martin Lane, managing editor of money.co.uk said: “What a dreadful way to treat your customers – not accepting gift cards would be one thing but to ask customers to send their gift cards back to them and then not issue any form of replacement or refund without any communication is incredibly bad practice.

“Surely the last thing you want to do when you buy a new company is anger the very people who are going to be your customers.

“This seems really shortsighted of Sports Direct boss Mike Ashley.

“He’s not under any legal obligation to refund customers because House of Fraser went under before he bought the brand, but you’d have thought he’d want to keep the relationship with its customers positive.”