Sears May Be Closing for Good—Here’s What to Do About Your Warranties
After more than 100 years of business, Sears and its subsidiaries (including KMart) are on the verge of collapse. According to CNN, a last-minute bailout could save some of the retail chain, but it's likely that every Sears' store will be liquidated. For shoppers who are looking to save big on some items, it could mean the flash sale of the year—but for those who have already purchased items from Sears, it could spell disaster.
Unlike many other home and kitchen retailers, Sears is known for selling unique extended warranties to accompany appliances purchased in their stores. But if Sears goes out of business, will shoppers who have purchased a warranty still be protected?
The company says so. According to this statement, Sears has provided a webportal where customers can ask for help with a replacement part for their appliance, called Sears PartsDirect. "We are honoring our warranties, protection agreements and guarantees as normal," the statement reads.
One corporate Sears representative explained to Business Insider that there are federal regulations to protect shoppers from this exact situation.
"We are a leader in the service contracts industry and proudly stand behind our product," the spokesperson told Business Insider last year. "Sears, as well as any other company that legally sells service contracts, is required to meet regulatory requirements designed to provide adequate resources to fulfill service contracts into the future."
But many legal experts believe that Sears' promises won't be kept if a federal judge decides to liquidate the company, Business Insider says. And the Federal Trade Commission makes it clear that once a company is liquidated, the warranty holder isn't able to do much about it. Under Chapter 11 bankruptcy protection, Sears would have to address creditors before they could compensate shoppers for things like extended warranties and reward points, which means there's a chance warranties would become void.
"Before you sign a contract, think about the company's financial situation and consider whether the business is reputable," the FTC writes under the section, "Who is responsible for the contract?"
In the past, however, exterior insurance companies have stepped in to serve customers who have been impacted by sudden closures—in the case of Circuit City, all extended warranties were honored by third-party insurers even though the chain officially closed in November 2008, CNBC reports. How? Many states currently require corporations to work with insurance companies to continue proper coverage.
What should you do if you have a warranty from Sears?
A local CBS affiliate in Chicago interviewed retail experts in the area to discover the best course of action; one source says you shouldn't worry just yet.
"Sears did sell a huge amount of extended warranties," James E. Dion, a retail consultant at Dionco Inc., told ABC7. "Those warranties are held, in many cases, by third parties and they will still honor those."
If you bought an appliance manufactured by brands like Samsung and Whirlpool, these products come with warranties independent from Sears—just make sure you have proof of when the item was purchased, Dion said. And even if you own something from Kenmore, a Sears-owned brand, there's a good chance that Sears' repair arm will remain in business.
"Whoever buys [Sears' repair center] likely, just as a smart business decision, will honor those warranties," he said.
But if you were planning on shopping at Sears in the near future, Dion said you shouldn't buy a warranty, nor should you expect to be able to return the product in the future.
"Understand that all sales are final at this point. Even though they don't tell you that. They will still have the famous Sears guarantee, but that guarantee will go away when full bankruptcy occurs. You really need to protect yourself when buying anything from Sears. And that's sad to even say," he told ABC7.
Final decisions about Sears' future will be made on January 14. Sears, Roebuck & Co. wasn't available for comment at time of publication, but we'll update this post with their advice if the retailer contacts us.