Texas AG tells RadioShack not to short-change consumers

By David Yates | Aug 11, 2015

The Texas Attorney General’s Office has filed a motion requesting that U.S. bankruptcy court to compel the former RadioShack to provide notice of bankruptcy proceedings to 2.9 million customers holding approximately $46 million in unredeemed gift cards.

According to an Aug. 11 press release, the order would allow consumers to meaningfully participate in the bankruptcy plan process, as they are entitled by law.

“Due to RadioShack’s actions, millions of customers are at risk of being shut out of the bankruptcy process, and they have every right to have their voices heard,” said Attorney General Ken Paxton.

“Just as my office successfully fought to secure the privacy of RadioShack customers, we will remain vigorously committed to ensuring consumers who hold unredeemed gift cards aren’t short-changed.”

Paxton says RadioShack has failed to give any notice of the claims process, or even notice of the filing of bankruptcy, to holders of unredeemed gift cards.

The press release states that RadioShack’s proposed plan of liquidation, which the company is seeking to confirm next month, would only provide notice after the plan is confirmed.

Paxton is asking the court to accelerate a hearing on the Aug. 11 motion to compel notice.

The legal fight centers on whether unredeemed gift cards are entitled to priority treatment for payment ahead of general unsecured claims.

While the former RadioShack’s general unsecured creditors are anticipated to receive only pennies on the dollar, consumers with priority status will be paid in full, the press release states.

RadioShack argues that only a gift card purchaser who still holds the gift card may be entitled to priority treatment, and all other unredeemed gift cardholders are not entitled to any priority.

Paxton contends that consumers holding unredeemed gift cards with limited exceptions are entitled to this priority treatment under applicable law.

A U.S. bankruptcy court last month ruled Texas’ case can move forward. Other states filing proofs of claim on behalf of their citizens for unredeemed gift cards are: Arkansas, Hawaii, Indiana, Maryland, Massachusetts, New York, Oregon, Tennessee and Virginia.

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