Thursday, January 12, 2006

Too many consumer stories, too little time

One of my new year's resolutions was to try to keep you more up to date on the steady flow of consumer news that comes my way - everything from word of scams and misleading marketing to reports about useful research and about regulatory action (or inaction) that affects the marketplace.

Today, a quick update on gift cards - the subject of two recent Consumer Watch columns (one on gift-card trends and another on the bizarre rules that make them a minefield) and a news story and sidebar today by my colleague Joe DiStefano, who explains why every last diner and pizza parlor is suddenly hawking these things.

The news is that New Jersey's legislature, with little fanfare, passed some slightly improved rules last month for Garden State consumers. Last week, acting Gov. Codey signed a new law, most of which goes into effect on April 4.

The good news: Gift cards and gift certificates sold after that date will not be allowed to expire for at least two years. "Dormancy fees," which eat away at the value of a card even before it expires, also can't be imposed for at least two years - two years after the card is issued, or if it has been used, two years after the last activity. And dormancy fees will be capped at $2 per month.

The bad news: New Jersey cards can still expire. You can give your Aunt Jan a shiny $100 gift card to use at the mall, and if she loses it in her purse for a couple years - you know how scatterbrained that Aunt Jan is! - it will be worth zip when she tries to use it.

There's no good solution for reminding the Aunt Jans of the world, short of gift cards with built-in alarm clocks, satellite locators, and mini-squawk boxes that could boom out "Spend me!" from her purse whenever she gets within 200 yards of a mall. (Hmm, maybe I should patent that!)

Most of those lost cards will never reappear, which is why some states - such as Pennsylvania and Delaware - make the funds "escheatable" to the state after, say, five years. The state gets the cash for safekeeping, gets the interest from it outright, and makes it possible for a consumer to make a belated claim for the money if a misplaced or forgotten card turns up.

Personally, I think that's a better solution than simply letting a store, restaurant, bank or mall owner keep the cash from Aunt Jan's gift. But the best solution would be to outlaw expiration dates and money-munching fees entirely.

For decades, American Express has sold travelers checks on that basis. I haven't checked lately, but in the past many were issued with no fee at all. Amex was content to profit from the time value of the money and the unstated expectation that some checks would get thrown out in the trash or lie in drawers so long they'd disintegrate (or be worth much less because of inflation). That's a reasonable model for gift cards, too.

At the very least, it's worth a try. If it dries up the market for these ubiquitous cards, what's the harm? You can still give Aunt Jan cash, or take the time to pick a thoughtful gift. (As everybody's Mom used to say, it's the thought that counts.)

My bet is that such rules wouldn't dry up the market at all, although the latest iteration - let's call it the "Joe's Diner Gift Card" - might disappear. But Joe never really needed gift cards, anyway.

Personally, I wouldn't mind if the unclaimed funds stayed with a company, if the value remained intact for consumers, though I'm sure officials in Pennsylvania, Delaware and other states would miss the extra cash flow.

But the bottom line is: You gave the gift to Aunt Jan. She should be able to use it or lose it, but without any time limits. It was your money. Now it's hers. It never belonged to the mall.

New Jersey legislators took a small step in the right direction. Pennsylvania legislators have periodically proposed eliminating gift-card nuisance fees, but their leaders have let the bills languish. It's time they stepped up to the plate, perhaps with a push from State Treasurer Robert P. Casey Jr.

Casey's spokeswoman told me recently that her boss would support legislation to eliminate nuisance fees on gift cards and certificates. “Real money was paid for something, and the goods were never received. The consumer is entitled to that money," she said.

I couldn't agree more. Now would be a good time to follow through.

9 Comments:

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Anonymous Brad said...

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Tuesday, March 14, 2006  

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