LIQUIDATION LOSERS

Many Sears customers left holding worthless warranties.

What happens to your Sears warranty now that the long-time Canadian retailer has gone into liquidation?

I’ve been fielding questions like this for a few weeks, but had no answers to give.

For example, one reader recently extended several warranties on her appliances. Instead of paying up front for the coverage, she opted to have monthly payments billed to her credit card over the next year.

She asked, “Am I obliged to fulfil my end of the contract, even though Sears won’t be providing the service it had contracted to provide?”

Another reader had an extended warranty on a Kenmore stove close to expiry and paid in full for a three-year extension for $219.82.

“The charge appeared on my credit card on Aug. 31, but the extended warranty does not come into force until Sept. 30,” he said.

“Now I know the warranty will not be in force, I want a refund.”

I caught up with spokesperson Vince Power one day before the liquidation sales began. I asked about what Sears calls its “protection agreements,” which offer free repairs after a manufacturer’s warranty runs out. Since Sears won’t honour the contracts after Oct. 18, will it give refunds? Only those who bought warranties in the past 30 days will get refunds. That’s the standard policy at Sears, he said.

Knowing that refunds would be out of reach for most people, why did Sears keep selling service plans after going into bankruptcy protection on June 22?

“We all expected to come out of it,” Power said. “We feel terrible. I’ll put it bluntly. Customers came to us and trusted us with their purchases.” If customers financed their warranty purchases, do they have to keep paying? Sears lost its branded credit card in 2015 after JP Morgan Chase decided not to renew its agreement. It found a new financing partner, EasyFinancial.

Customers who bought an extended warranty with deferred payments as part of a financing contract with EasyFinancial will still have to pay, Power said. What about people who used Visa, MasterCard or Amex credit cards to finance 12 equal monthly payments? Most financial institutions offer refunds for non-fulfillment within 60 to 90 days of a purchase. But given the size of Sears’ liquidation, credit card issuers may revise their policies in future. What about the Sears money back warranty, which provides a refund to customers who never make any claims? They are out of luck if the warranty expires after Oct. 18, 2017. But in truth, this marketing gimmick had very restrictive conditions.

For example, Anu Parmar paid $225 for a money back warranty on a $1,300 TV. When he asked for a refund, he learned he could get only a gift card, not cash. He had to buy $450 worth of Sears merchandise and make a purchase in 90 days.

When Parmar wrote to me after missing the 90-day expiry, I managed to get him a $150 gift card that wouldn’t expire. However, I received frequent complaints after I wrote about his case and many customers got nothing. Will another company buy Sears’ client lists and provide warranty service in the future? Parts of the warranty business may be sold, Powers said, but it’s unlikely that another company would buy the whole thing.

“They might buy the names, perhaps, to establish relationships with customers. But I think it would be more expensive than it’s worth. I don’t want to give your readers false hope.”

Bids for unsold parts of the company or assets are still being sought, he said. Can customers do anything else to get money back? They can file a claim as an unsecured creditor, which could lead to a payout after all the secured creditors — such as landlords, lenders and tax collectors — have been paid. But unsecured creditors often get zilch.

Once a claims process is approved, FTI Consulting (the court-appointed monitor) will provide claims forms at its website or help by phone (416-649-8113, toll-free 1-855-649-8113).

“Please note that the monitor is not able to provide information on assistance regarding your warranty,” Power said.

After all the sad stories I heard from Sears customers, I have a happy one to offer.

Jennifer Neumann bought $10,000 worth of appliances in 2015 at a sale that offered 20 times the points. She didn’t realize that her Sears Club points had a one-year expiry date until she struck out trying to redeem them.

With the help of the company’s Power, she had her points restored. After buying a sofa, she still had $250 worth of points to redeem.

I wrote to her at 2 p.m. on Oct. 18, urging her to cash in the points before they were worthless. She and partner Paul Tebby drove to a Sears store that evening and found enough kitchen gadgets — a blender, cast iron cooking pot, canisters and electric choppers — to use up all their bounty.

My advice: The Sears liquidation was unexpected, leaving little time for customers to absorb the implications and act accordingly. If you are owed money, ask your credit card issuer for leniency as a goodwill gesture. Ellen Roseman’s column appears Tuesday in Smart Money. You can reach her at eroseman@thestar.ca.