RadioShack: Don’t Short-Change Consumers

AUSTIN August 13, 2015 – The Texas Attorney General’s Office today asked a 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. This 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,” Texas Attorney General Ken Paxton said. “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.”

To date, 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. RadioShack’s proposed plan of liquidation, which the company is seeking to confirm next month, would only provide notice after the plan is confirmed. Attorney General Paxton is asking the court to accelerate a hearing on today's motion to compel notice.

The legal fight between the Texas Attorney General’s Office and the former electronics retail giant 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.

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 card holders are not entitled to any priority. Attorney General 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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