Schumer Stops the Gift Card Gobble
Sen. Charles E. Schumer hates buying gifts. He's laughingly told his aides that whatever he buys invariably ends up being the wrong size, duplicated by something the recipient already has or or just too uncool for school. So the Democrat from New York has turned to gift cards when buying for friends and relatives.
He's got plenty of company. The ease of giving plastic cash has turned gift cards into an $88 billion in sales industry. But it has a dirty little secret. About one quarter of the gift cards you give never get used, according to a report released earlier this year by researchers at the TowerGroup.
When Schumer started getting reams of complaints about gift cards that "expire" before the recipients can use them and that come loaded with nagging little fees that can gobble up their value, he introduced the "Fair Gift Card Act." That proposal, introduced in March, has now been tacked onto the Credit Cardholders Bill of Rights, which is speeding toward passage.
That means Schumer's gift card protections are likely to go into effect early next year--just missing next holiday season. These protections would do three simple things:
- Demand that cards have at least a five-year life, banning those that "expire" months after purchase.
- Bar dormancy fees until the account has been completely unused for more than a year. (Dormancy fees typically range from $2 to $2.50 and can eat up the value of a small gift card in no time.)
- Empower the Federal Reserve Board to set caps on the total fees that gift card issuers can levy. These fees come in wide variety--service fees, dormancy fees, origination fees, etc.
That's going to change next year. But, for now, it's still buyer beware.
