FUMO TRYING TO PROTECT VALUE OF GIFT CARDS TO CONSUMERS

     HARRISBURG, December 10, 2007 – State Senator Vince Fumo today reminded holiday shoppers to be aware of the pitfalls of gift cards, and he wrote to the chair of the Senate Consumer Protection and Professional Licensure Committee asking that his legislation guarding the value of such cards advance to the Senate floor.

     “Gift cards are becoming an increasingly popular holiday item because of their convenience, but consumers need to be aware that the recipients of the cards are sometimes shortchanged,” Fumo warned.

     Fumo (D-Philadelphia) has introduced a bill that would guarantee Pennsylvania consumers the right to obtain the full value of gift certificates, even if they are not redeemed for several years. The legislation (SB 928) is intended to clarify the confusing state law regarding the issuance, use, expiration and reversion of gift certificates in the state. A bipartisan group of 17 co-sponsors introduced the bill in addition to Fumo.

     Americans last year spent an estimated $80 billion on gift certificates and gift cards, and the number could reach $100 million this year, according to news media reports. A significant portion, perhaps as high as 10 percent, often goes unused.

     While the unused money belongs to consumers, current state law is not clear enough to make sure that they actually receive it. It is often retained by the issuer as a "handling fee" or "inactivity fee."

     Under the bill, if a business chooses to place an expiration date on a gift certificate, it can be no less than two years beyond the date of issuance. Even if it does list an expiration date, however, the business would still be required to redeem the certificate for the full face value through five years.

     After five years, the consumer could recover the value as unclaimed property through the state Treasury under escheat laws. The bill would require sellers to record the address of the eventual recipient to make recovery more feasible.

     The bill also addresses the gradual erosion of card value through fees. Some retailers retroactively impose a monthly inactivity fee if a card is not used for a given period, which can wipe out the value of the card. This practice would be outlawed under the Fumo legislation.

     Fumo sent a letter today to Sen. Robert Tomlinson (R-Bucks), the chairman of the Consumer Protection and Professional Licensure Committee, where the bill now resides. The committee meets tomorrow, and could report the bill to the full Senate.

     In the letter, Fumo noted that at least 30 states have already passed laws regulating gift cards, including limitations or prohibitions on fees.

     “It would be fitting to move this measure out of the Consumer Protection and Professional Licensure Committee during the holiday shopping season, and at the same time let Pennsylvanians know that their legislators are aware of the problem and are willing to correct it in the immediate future,” Fumo wrote.

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(On Senate Letterhead)

December 10, 2007 

The Honorable Robert M. Tomlinson
Room 362 Main Capitol
Harrisburg, PA 17120

Dear Senator Tomlinson: 

I write to ask respectfully that you schedule for a committee vote Senate Bill 928, which would protect Pennsylvania consumers from losing the value of purchased gift cards. Over the past few years, gift cards have become a very popular holiday item.  Last year, more than $80 billion worth were sold.  This holiday season, the number could go as high as $100 billion. 

A growing concern arises from the increasingly common use of gift cards, however, because the recipient, for various reasons, often does not receive full face value for the card. He or she may not use all the credit on the card at once, and then forgets that a balance remains. Much of that credit is never used at a future time. According to an article in the Parade Magazine, experts have determined that $8 billion went unspent last year. 

Another issue is that some cards lose their purchasing power if not used during a specified period of time.  A third problem is that some banks impose a maintenance charge for each month that the gift card is not used within a certain period of time.  

To address these problems, more than 30 states have passed laws regulating gift cards, including limiting or prohibiting fees.  Some states have also required retail stores or banks to clearly spell out the limitations of the gift card. 

Senate Bill 928, which I have sponsored along with a bipartisan group of 17 of our colleagues, remedies the most severe problems with gift cards. Under this legislation, retail establishments and banks must give the recipient of the gift card at least two years to expend the credit on the card.  The legislation also would prohibit any transaction or service fees. 

It would be fitting to move this measure out of the Consumer Protection and Professional Licensure Committee during the holiday shopping season, and at the same time let Pennsylvanians know that their legislators are aware of the problem and are willing to correct it in the immediate future. I respectfully ask that you bring the bill up for a vote. 

Sincerely Yours,

(signed)

VINCENT J. FUMO                                                                              State Senator