NCL Personal Finance Issues
The National Consumers League has been joined by Consumer Action and the Montgomery County, Md, Office of Consumer Protection to call on the gift card industry to ease the burden on consumers by lifting expiration dates, lowering fees, and more.
1. Gift cards should have no expiration dates.
Gift card holders have the expectation that their cards are as good as cash at a retailer. They should be able to use their cards regardless of when they received the card
2. The value of a gift cards should not be reduced by arbitrary fees that diminish a card’s value.
The funds available on gift cards are often reduced significantly by a variety of postsale fees (called “dormancy,” “inactivity,” or “maintenance” fees, depending on the card) if the value of the card has not been exhausted within six to 12 months of purchase. We believe the funds stored in these cards should be available to consumers to pay for goods and services, not the card issuer’s administrative costs.
3. Fees assessed on a card purchase should not exceed five dollars or ten percent of the value of the card.
The processing charges or sales fee charged at the point of sale for gift cards should be reasonable and consistent with the expected costs incurred by the card issuer to market the card and service the card post-sale.
4. Card replacement fees should not exceed two dollars or ten percent of the purchase price of the card, whichever is less.
Card holders lose cards for a variety of reasons, including theft. Fees associated with replacing the card should be reasonable.
5. Cards with a balance of five dollars or less should be redeemable for cash with no fee.
Many cards are unusable when consumers attempt to use them to make purchases greater than the value of a card. Many retailers are unable or unwilling to attempt a “split tender” transaction to address this issue. As such, we believe that consumers should be able to redeem gift cards with a remaining value of $5 or less for cash, without a fee.
6. Balance inquiries should not deduct from the value of the card.
Consumers may need to check the remaining balance on their cards from time to time. Doing so should not reduce the value of the card itself.
7. Terms and conditions should be clearly disclosed.
Consumers should be made aware of any fees associated with a card before purchasing it. Such terms and conditions should be viewable on the card itself, the card’s packaging, in-store display, and on an easily accessible Web site.
8. Unused funds should not go into the card issuers’ pockets, but should accrue to a state fund to be used for the specific benefit of consumers.
The residual value of lost or unused cards falling under states’ unclaimed property laws should be used to benefit consumers, not to the bottom lines of big banks and retailers. Appropriate uses of such monies would be a fund to compensate victims of consumer fraud, grants to non-profit organizations fighting fraud, and support for state programs to educate the public about consumer fraud.
9. Funds from the sale of gift cards should be segregated and held in trust accounts so as to be automatically honored in the event of the cards issuer’s bankruptcy.
Recent retailer bankruptcies have resulted in consumers being unable to use their gift cards or only being able to redeem t heir cards for pennies on the dollar. Consumers who purchase gift cards have, in effect, prepaid for goods and services and their purchases should be honored, regardless of the bankruptcy status of the card issuer.
10. These rights should cover any electronic gift card with a banked dollar value.
Consumers generally do not differentiate between gifts cards usable at a single retailer or multiple retailers. The rights afforded them should be consistent regardless of the issuer of the card.