By Tom Ryan
While they're one of this season's most desired holiday gifts, gift cards are also exceedingly popular among lawyers looking to protect consumers from their hidden fees and early expiration dates. Some are even looking for ways to reclaim amounts left after the cards expire.
State gift card action started in earnest in 2004 and has increased steadily along with the cards' popularity. Since 2003, companies like Barnes & Noble, Blockbuster, CompUSA, Kmart and Toys 'R' Us have dropped their expiration dates and service fees. But legislation around them appears to be gaining momentum.
This year, Illinois and New Mexico passed bills requiring gift cards to last at least five years before expiring. Arkansas, Oregon and Utah require gift cards to disclose the expiration date, and Arkansas and Oregon go as far as to require it be printed on the card in 10-point type. North Carolina's new law states that all fees be disclosed and that no fees take effect until a year after purchase. In total, 30 states have some sort of limitation on expiration dates or fees, while another seven require that fees and expirations be disclosed.
In California, a new law will enable consumers to redeem gift cards for cash if the balance is less than $10.
Other newer laws center around redeeming a portion of the unused cards' value as unclaimed property. (An estimated 10 percent of all gift cards purchases are never used.) In Illinois, for example, the treasurer's office is holding more than $5 million in unused gift card balances that residents may be able to redeem for cash if their gift cards expired.
But an article in the New York Post claims that retailers have set up separate gift card subsidiaries in states that allow them to keep the unredeemed balances from long unused cards. Typically, these states have more retailer-friendly laws to avoid these payouts.
"Unfortunately, the current laws benefit retailers by allowing them to incorporate their gift-card business in another state," Thomas DiNapoli, the state controller told the Post. "The best way to avoid this problem entirely is for consumers to use gift cards within a year of purchase."
One critic to the excessive restrictions on gift cards is Craig Shearman, a spokesperson for the National Retail Federation, who claims gift card fees cover the additional costs associated with offering them. His group opposes any restrictions on gift cards, saying that expirations and fees should be left up to individual retailers. If gift card legislation is necessary, Mr. Shearman told The Associated Press, he would prefer to see it at federal level so that retailers could deal with one law instead of the patchwork state laws.
"At a certain point, if it becomes exceedingly expensive and exceedingly burdensome for a company to offer a product in some states, it may be efficient for the retailers to simply stop offering the product," he said.
Discussion Questions: What responsibility do retailers have to make sure consumers receive the full amount of their gift cards? Should all fees and expiration periods be eliminated? Do you see the federal government eventually regulating gift cards?