Federal Legislation Considered to Regulate Gift Cards

By Dec 02, 2003

New York Senator Charles Schumer plans to propose federal legislation to ban monthly fees automatically deducted from gift cards. The legislation would be modeled after new California and Massachusetts laws that ban monthly fees.

A growing number of states have this year either passed new laws regulating gift certificates and cards or tightened existing regulations. (November PROMO)

Schumer cited a new study of 32 New York store and mall gift cards that revealed that as much as $2.50 a month can get automatically deducted from cards as soon as six months after they are first purchased. A penalty, he said, that few gift givers or receivers are aware of. The fees are often disclosed in small print on the back of cards, Schumer said.

“Anyone who has ever gotten an ugly sweater from Aunt Edna knows what a godsend gift cards can be,” Schumer said in a statement. “But they should come with a warning attached — there may be a Grinch in that gift card. I was surprised when I heard how the money on a gift card can disappear into thin air if the card sits unused in your wallet.”

New Yorkers will buy more than $1.7 billion in gift cards this year, he said. Nationwide that number will top $45 billion.

Schumer’s staff conducted a survey of 32 gift cards from a range of New York stores. The study found that 18 of the 32 cards, or 56%, charged monthly fees if the full value of the card was not used within six to 24 months.

And as legislators move to regulate gift cards, the certificates appear to be gaining in popularity.

Some 45% of the U.S. adult population, or 97 million people, purchased a gift card over the last 12 months, compared to just 23% in a similar survey conducted in August 2002, according to a study commissioned by ValueLink, a gift and spending card service based in Denver, CO.