by Mary Deibel
Scripps Howard News Service
December 04, 2004
The Jones family of suburban St. Louis has been exchanging gift cards for a decade, ever since matriarch Charlotte's failing eyesight forced her to forgo the daily mall walks that let her spy the perfect gift for everyone on her list.
So the family started getting gift-card stocking stuffers instead until niece Mary tried buying $48 shoes with her $50 card only to find its value all but vanished. "I didn't read the fine print saying the card charged a $2.50 fee each month it wasn't used," she says.
The 75 percent of shoppers who will buy gift cards this holiday must learn to scan the fine print, too, because the cards can carry all kinds of fees and rules including time limits for redemption, warns Bill Hampel of the Credit Union National Association.
"Often the story here is use it or lose it," he says. "Ask the vendor how long the gift card is good for, if it carries fees to check balances and the like and if the card will cost the recipient anything. If the answer is yes ... get something else."
Help is on the way for gift card buyers, expected to spend $45 billion on cards this year, by consultant Bain & Co.'s estimate. The National Retail Federation predicts $17.34 billion worth to be sold this month.
States have begun policing gift card practices for hidden fees and other requirements that can erase the face value of the cards. Starting with California in 1996, a number of states have enacted laws extending expiration dates and prohibiting hidden fees, and a dozen more have proposed similar legislation.
Last month three New England states invoked their laws to sue Simon Property Group, the Indianapolis real estate investment trust that owns or holds interest in 299 shopping centers in 39 states and Canada.
The attorneys general of Connecticut, Massachusetts and New Hampshire filed individual suits in their state courts alleging that Simon sold stored-value gift cards that violate state bans on expiration dates and certain fees.
"These gift cards are riddled with additional charges that consumers should not have to pay," Massachusetts Attorney General Tom Reilly complains, including a purchase fee, a fee for checking the balance and a $2.50-a-month dormancy fee for a card that hasn't been used for six months.
Simon has countersued in federal court, contending that the gift cards it issues at its malls and on its Web site aren't local gift cards subject to state rules but nationwide cards subject to federal regulation because they're issued in conjunction with a national bank, Bank of America, and redeemable anywhere Visa cards are accepted.
The cases will take years working their way through the courts, but states aren't helpless in the meantime: Most invoke obscure unclaimed property laws, known as "escheat" laws, to require the unspent value of gift cards and certificates be turned over to the state treasurer if customers don't redeem them within a specified time.
Rules vary from state to state, but the time limit typically is three to five years, after which an individual can file a claim with the state to have the property returned.
There is an estimated $4 billion out there in unredeemed gift cards, according to the New York affiliate of the U.S. Public Interest Research Group. And Pennsylvania Treasurer Barbara Hafer reports her office alone has $3.6 million from unused gift cards and gift certificates that it is trying to return to the rightful owners.
Meanwhile, a federal proposal based on California and Massachusetts laws requiring that gift cards be honored at face value for at least five years has gone nowhere despite support by consumer activists such as Consumers Union attorney Gail Hillebrand.
"States clearly have power over their retailers' cards, but if states lose in court or the issue is unclear, Congress would need to act," Hillebrand says.
To help gift-givers now, Consumer Reports, a Consumers Union publication, rates dozens of bank and merchant gift cards in the current issue and advises people to steer clear of giving bank-related cards _ and if you receive them, spend them immediately. The ratings are online at www.consumerreports.org under "Holiday Gift-Giving Guide."
Still, as chief Senate sponsor Charles Schumer, D-N.Y., says in pushing for federal gift-card supervision: "Anyone who has ever gotten an ugly sweater from Aunt Edna knows what a godsend gift cards can be.
"But they should come with a warning attached: The money on a gift card can disappear into thin air if the card sits unused in your wallet."
On the Net, state attorneys general are online at www.naag.org
State treasurers at www.nast.net
Reach Mary Deibel at deibelm(at)shns.com