Per title, say a location gets banished (such as in PFSACG scenario 3-2E) and it has cards displayed at that location. What happens to those displayed cards? For the sake of discussion, let's say it's a Lightning Storm (pretty sure that's the card name at any rate. But really this could apply to any displayed card at that location, really).
How I played it was that the card remained displayed but is no longer attached to any particular location (so, it's just in limbo basically). It was then returned to the box at the end of the scenario. I believe that the RAW is basically this, as you are not told to do anything with such cards.
However, I believe that when banishing a location, any displayed cards at that location should similarly be banished right then and there.
For the sake of posterity, let's also look at the situation where a location that still has cards in its location deck gets banished -- what happens to those cards? I would argue that they should be banished as well (except for character cards and cohorts). This cannot happen in 3-2E to the best of my knowledge, but I wanted to point it out as well as there is similarly no rules support for this situation either.
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I agree that the cards should be in limbo. I don't think that they should be banished, because that could lead to some cards owned by a character being banished when they shouldn't be. This is because when you banish a location, it's not closed, and there are some spells, like Elemental Treaty for example, that only give you the chance to recharge when the location they're displayed at is closed. If you said "banish any cards displayed at a location when that location is banished", you'd be banishing spells like that, unless you specifically handled them. Instead, I think the best way to do it is that those cards stay where they are until the end of the scenario.
The cards remain on the table until something makes them move or you're cleaning up post-scenario.