Local business boosters hold faulty certificates

March 6, 2009
| By Pete Daly |
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The abrupt demise of a gift certificate company in Ohio has wreaked financial havoc on local business booster organizations across the U.S., including West Michigan.

The Holland Area Chamber of Commerce and the Grand Haven Chamber said they will honor the CertifiChecks gift certificates issued under their respective programs to promote local businesses. However, the chamber in Muskegon and the Local First organization in greater Grand Rapids, which have similar programs using the same company, weren't sure they could honor the unredeemed gift certificates still in circulation.

According to the Muskegon Area Chamber of Commerce, hundreds of chambers across the nation and more than 80,000 retailers were affected by the sudden Chapter 7 liquidation of CertifiChecks Inc. of Dayton, Ohio, at the end of February.

CertifiChecks took the money and issued the gift certificates on behalf of the local chambers. Businesses that participated in the programs would accept the certificates as payment and deposit them, like checks, into their bank accounts.

On Feb. 27, however, a Muskegon merchant reported that a gift certificate had bounced.

An advisory from the Muskegon chamber last week asked people "not to panic" until legal options are known. It said the Muskegon Area Chamber of Commerce sold nearly $275,000 in CertifiChecks gift certificates since Jan. 1, 2008, many of which have been redeemed, but that "there is no way to tell for certain how many are potentially circulating."

"We cannot do that until we understand how much money is out there. We cannot promise to reimburse people unless we know we have the resources to back it up," said Cindy Larsen, Muskegon Area Chamber of Commerce president.

Later in the week, Janessa Stroud, vice president of government affairs at the Muskegon chamber, said more than 120 merchants had participated in the chamber's gift certificate program over the past seven years. She said those that had already paid their $25 enrollment fee for participating in the program in 2009 would be receiving that $25 back. The chamber said Thursday the total budgeted refunds amount to nearly $1,800.

Jane Clark, president of the Holland Area Chamber of Commerce, said last week that her "best estimate" is that there is likely about $108,000 worth of gift certificates issued under the Holland Dollars program that have yet to be used.

"Fortunately, we're in a strong financial position and are able to honor them," said Clark.

"Our chamber felt very strongly, especially right now, that this was not the time to say, 'Sorry, these things are worthless,'" said Clark. "So we are taking it upon ourselves to continue the program and make good on the certificates," as long as they are valid certificates that have not expired.

She said the Holland chamber has operated its Holland Dollars program for more than 20 years. Since 2001, it had been managed by CertifiChecks. The gift certificates were issued in $5, $10 and $25 dollar amounts.

"Since 2001, we had sold $3.1 million of gift certificates, so it was a very big program — a very successful program," said Clark.

She said 172 merchants in the Holland area had agreed to accept the Holland Dollars as part of the chamber's ongoing mission to support local businesses.

Clark noted that the Holland Chamber will be filing a claim in the bankruptcy proceedings of CertifiCheck.

Elissa Hillary, executive director of the Local First organization in Grand Rapids, said almost 500 businesses participate in Local First programs, and "all of the businesses were accepting the gift certificates (managed by CertifiChecks) — all but just a couple."

"We are asking individuals who have received Local First gift certificates that they have not used to please contact our office so that we can get an idea of that amount. All of the gift certificates were sold by CertifiChecks directly and we are unable to reach them to find out how many have yet to be redeemed."

"So Local First never touched any of the money and unfortunately, because of that, we have no idea how many gift certificates are out there," added Hillary.

"If possible, we'd like to try to honor them, but we don’t know at this point whether we'll be able to do that or not. … We don’t know if it’s 500 or 15,000" certificates, she said.

Hillary also noted that the coupon books issued by Local First had nothing to do with CertifiChecks and were not affected.

Noting that it was facing "a challenging economic year ahead,"  the board of the Grand Haven Chamber voted last Tuesday to honor its unexpired gift certificates — "even though it meant the chamber will have to absorb thousands of dollars that CertifiChecks held," according to their announcement.

“Due to the unexpected announcement from CertifiChecks, it took us longer than expected to determine our potential exposure as all records are held by CertifiChecks. Even though the amount could exceed $70,000, the board felt honoring the unexpired certificates was the right thing to do,” said Joy Gaasch, president of the Grand Haven Chamber.

Gaasch said participating merchants should accept the unexpired certificates as normal but instead of depositing the certificates at the bank, they can return the certificates to the chamber for direct reimbursement.

“This program was designed to promote buying local and it is our intent by this action to continue our support of our local business participants," said Gaasch. "For us not to honor those certificates would hurt those who are already experiencing a very rough economic climate,” she said.

Currently, the chamber is exploring the quickest way to bring a new gift certificate program in house through a local financial institution.

“It’s disappointing that CertifiChecks has left over 450 organizations throughout the United States that trusted them as partners, high and dry with no present recourse to collect money due their businesses," said Gaasch. "It is time to move forward and I am excited about the design of a new program that will continue to promote buying local in our community.”

Clark of the Holland Chamber said the failure of CertifiChecks was "the worst possible nightmare faced by chambers all across the country."

She said the gift certificates were sold and exchanged at face value, so it is presumed CertifiCheck was making a profit over time on certificates that were lost or never redeemed, and on the interest during the "float" — the period of time between the purchase of a certificate and its use.

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