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September 2005

Lawmakers Tackle Gift-Card Problems

   Gift cards are becoming increasingly popular with consumers. Last holiday season, consumers were estimated to have spent more than $18 billion on these cards—more than was spent on clothing purchases. Accounting firm Deloitte Touche found that adults received an average of 3.2 gift cards during the holiday season, with a face value of $142.98.

   The Wisconsin Bureau of Consumer Protection reports that consumer gift-card complaints are also increasing. Consumers are unhappy about high disclosed and undisclosed fees, the lack of locations where the cards are accepted, and undisclosed expiration dates.

   Representative Peggy Krusick (D–Milwaukee) and Senator Sheila Harsdorf (R–River Falls) have introduced Assembly Bill 583 to regulate gift cards. The bill prohibits gift-card expiration dates, allows consumers to request a cash refund, requires merchants to refund any balance less than $5, and requires merchants to disclose the date the card was issued and the remaining balance. The bill also creates substantial civil penalties and allows consumers to bring their own court complaints.

   The bill is opposed by several organizations, including the Wisconsin Grocers Association, the Merchants Federation, the Wisconsin Restaurant Association, American Express, and Kwik Trip, Inc. According to the Wisconsin Grocers Association, the bill goes too far because there are costs associated with keeping track of gift cards and because the $10,000 maximum potential civil penalty is too high. Together, the groups are seeking alternative legislation that is less strict.

   Krusick and Harsdorf said they introduced the bill because of constituent complaints. Rep. Krusick states, “It’s very simple; a gift card that says $50 on the front should be worth $50.” Their bill is supported by a bi-partisan majority of legislators in both the Assembly and Senate, as well as by the Department of Agriculture, Trade & Consumer Protection. To date, seven states have enacted gift-card regulations and 15 state legislatures are considering similar bills.

   How should you protect yourself? The U.S. Comptroller of the Currency advises you to understand what fees are being charged before you purchase the gift card, including (1) purchase fees; (2) monthly, service, administrative, or maintenance fees; (3) inactivity fees; (4) transaction fees; and (5) miscellaneous fees for balance inquiries, replacing a lost or stolen card, or for other services. Also, make sure you know your card’s expiration date and where it can be used. Finally, if you buy the card for someone else, make sure you pass along this important information to him or her.

   Do you support this bill or does it go too far? You can let your state legislator know how you feel by contacting the Legislative Hotline toll free at 1-800-362-9472.

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