SCHUMER, MARK UDALL INTRODUCE BILL TO PROTECT CONSUMERS FROM HIDDEN GIFT CARD FEES SECRETLY DRAINING SHOPPERS' POCKETS
Bill Comes on Heels of Recent Report Showing Whopping 27% of Gift Cards Go Unused Every Year, Partially Due to Current Anti-Consumer PoliciesSenators Warn Consumers to Still Beware of Scams - Hidden Fees, Balances That Decrease Over Time If the Cards Aren't Used
WASHINGTON, DC-U.S. Senators Charles Schumer (DNY) and Mark
today announced that they will be introducing the "Fair Gift Card Act" to protect millions of American consumers from unreasonable expiration dates and fees that routinely drain gift cards' value. Though gift cards are popular gifts, studies have shown that 27% of gift cards go unused, due in part to cumbersome expiration dates and fees which chisel away at cards' value, depriving consumers of purchasing power. Many stores also saddle the cards with hidden fees and sneaky clauses that draw down the balance. Schumer's bill will aid consumers by prohibiting excessive fees, and ensuring that all cards remain valid for at least five years.
"It used to be that searching for the latest bargain or sale was the biggest challenge for shoppers, but now with trickier fees and restrictions appearing every day on gift cards, the new challenge is reading the fine print," Schumer said. "During these rocky economic times, we must work to ensure that companies stop fleecing consumers. The Fair Gift Card Act will ensure that gift cards serve their purpose: to allow recipients to spend the full value at the store whenever it is convenient for them."
"In recent years it's become increasingly common for Americans to give friends and loved ones gift cards instead of apparel or other items. So, I want to make sure that these gift cards maintain their fair value. This bill would bring greater transparency and a fiveyear guarantee for gift cards to ensure customers are protected and getting their money's worth," Senator Udall said.
Gift card sales have been robust in recent years, and although sales declined in 2008, they still accounted for a staggering $88.4 billion in spending. Yet despite gift cards' popularity, a report by the TowerGroup indicates that $6.4 billion of the $88.4 billion spent on gift cards last year will never be redeemed
. These unused cards equal free money for banks and retailers, who often take service and dormancy fees from inactive gift cards, charge monthly maintenance fees, and recoup the value of an unused gift card after it expires, sometimes in as little as six months or a year. As a result of these fees, consumers may lose $2 or more a month from their cards, or lose the entire value if they are not used quickly enough.
Even those cards that are eventually redeemed may not be at full retail value by the time a consumer uses the card, due to dormancy or monthly fees. According to a study published in Consumer Reports in 2007, up to 27% of gift cards purchased in 2006 had yet to be used a year later, up from 19% at this time in 2005. Of those surveyed, over half said they didn't have the time to use their card, onethird hadn't used the card because they hadn't found anything they wanted, and another third forgot about their gift cards. However, a startling 7% of those surveyed had not yet redeemed their gift because the card had been either lost or it had expired.
In order to protect gift card purchasers and recipients, Schumer and Udall announced today that they will introduce the "Fair Gift Card Act" to end exorbitant fees and burdensome expiration dates. The bill helps consumers to retain the value of their gift cards by prohibiting gift card issuers from imposing a dormancy or service fee, unless the gift card has less than $5 remaining on it after 24 consecutive months of inactivity and the fee does not exceed $1 per month. In addition, the bill requires that gift cards remain valid for at least five years.
To further protect gift card purchasers and recipients, Schumer asked the head of the FDIC, Shelia Bair, to issue a national advisory listing the companies whose gift cards qualify to be insured. In addition, he wrote to the head of the National Association of Retailers and urged him to have his members clearly display on their cards and advertisements that the cards are insured. Schumer said major retailers have an incentive to publicize that their cards are insured because it will give consumers greater confidence that if they buy the give the cards the money wont end up being lost.