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Going Out Of Business Sales: the rules & the right ways to shop them

The recent demise of Sports Authority and its going out of business sales mean it’s time to remind you of the rules — and your consumer rights.

A retailer can only advertise a going out of business sale if it is actually going out of business. There’s a reason I make that point. Less scrupulous companies will often hold bogus going-out-of-business sales. They’ll build a buzz in the community to drive bargain-hunters to their stores, use the sale to unload substandard product or defective merchandise, then go right back to business as usual.

For that reason, the Tennessee Consumer Protection Act outlaws advertising a going out of business sale more than 90 days before that business ceases to operate. Business owners who violate the law face civil penalties between $1,000-5,000. Shelby County takes it one step further. It requires business owners to obtain a $25 going-out-of-business sale permit from the Shelby County Clerk’s Office. They must have a valid permit before they even start advertising the sale. It’s valid for 30 days, and they may renew it up to three times.

Now that you know that, here’s how you should navigate a going out of business sale.

  • KNOW WHO’S RUNNING THE SALE. That would be the retailer, right? No. In most cases, the retailer has hired a third-party or sold its merchandise to a third-party liquidator.

“Liquidators may base discounts on the manufacturer’s suggested retail price, which often is higher than what stores typically charge,” said Colleen Tressler, consumer education specialist for the Federal Trade Commission. “That means items can end up costing more than they did before the sale began.”

  • NO REFUNDS/RETURNS. The company’s going out of business, so don’t expect some generous return policy. In fact, don’t expect one at all. Assume all sales are final and shop accordingly.
  • NO COUPONS OR STORE CREDITS. The liquidator is under no obligation to honor the retailer’s coupons or store credits. You can try, but if it refuses, you don’t have a leg to stand on.
  • COMPARE PRICES ONLINE. Since the liquidator’s prices may be higher than the retailer’s, use your phone while at the sale to see what other stores are charging for the same items.
  • USE YOUR CREDIT CARD. You have no recourse if something goes wrong with the merchandise or the liquidator doesn’t deliver what it promises. But you can dispute a credit card charge. Under federal law, you’re never liable for more than $50 of a disputed charge. Most competitive consumer credit cards carry zero liability as a feature, so typically you’re not liable for any amount of a disputed charge.
  • COUNT ON LOUSY CUSTOMER SERVICE. Remember, they’re going out of business. Don’t anticipate snappy customer service.
  • UNDERSTAND WARRANTY TERMS. There are manufacturer’s warranties (warranties backed by the company that made the product), then there are extended warranties that are typically backed by a third-party warranty company. If you’re buying an appliance or electronic item at a going out of business sale, ask about any warranty limitations and confirm whether that item is still under its manufacturer’s warranty or covered under an existing extended warranty.

This situation is one of the reasons why I preach over and over that you should use gift cards or gift certificates as soon as you receive them. Gift cards are essentially unsecured credit. If the company on that gift card goes out of business and you’re still holding it, it’s worthless.

You’ll just use it at the going-out-of-business sale, you say? You can try. But I bet the liquidator in charge of the going out of business sale is going to give you the business — and I don’t mean honoring your gift card.

Copyright 2019 Wise Choices TM. All rights reserved.

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