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LEGAL MATTERS: Gift Cards—What Are Your Rights?

Wednesday, September 26, 2012

 

Gift cards are one of the easiest ways to allow a friend or loved one to shop on your dime. Or for you to shop on theirs. But how protected are they? Photo: 401(K) 2012/flickr

A gift card can seem to be the perfect solution for the person who has everything. Many buyers, however, found themselves with far less than they bargained for after retailers started placing expiration dates on cards and packing them with unknown fees. After years of complaints from consumers, the federal government and states took action.

In 2009, Congress passed the federal Credit CARD Act which acts as a floor – setting minimum requirements for gift certificates and cards. States can exceed these laws and many do. Under the federal law, gift certificates issued after August 22, 2010 cannot expire for five years. Note, though, that if you do not use the card within 12 months you can be charged an inactivity fee.

Are you protected by local laws?

Several years ago, Rhode Island passed a strong, pro-consumer law barring expiration dates and post-sale maintenance fees on gift cards. Unfortunately, the law specifically excludes free award, loyalty or promotional cards and phone cards and bank cards. If you don’t spend the full amount, you can take the balance on the card in cash, a long as it is less than $1.00.

Rhode Island law also does not apply to cards purchased out of state and protections vary widely among the states. In Massachusetts, gift cards are redeemable for cash after 90 percent of the value has been redeemed, although they expire seven years from the purchase date. As in Rhode Island, bank cards and phone cards are exempt. Consumers with reloadable gift cards with a balance of $5 or less can elect to take the balance in cash. Connecticut law mirrors Rhode Island law, barring store-issued cards from having an expiration date or inactivity fee but placing no limit on bank cards.

When you are out of luck

Many retailers offer no protection if the card is lost or destroyed. And, in tough economic times like these, it is possible that the business from which you purchased the card, may wind up out of business. If a retailer files for bankruptcy protection there is a possibility that the gift card may not be honored or there may be limitations place on its use.

One safe alternative to the gift cars is to make a date to take the gift recipient shopping. Not only is it an opportunity to spend some quality time with a loved one, but there is no substitute for being present when the recipient selects the perfect gift.

The foregoing is offered for informational purposes only and is not legal advice nor does it create an attorney-client relationship.

Susan G. Pegden is a litigation associate with the Law Firm of Hamel, Waxler, Allen & Collins in Providence.  She is admitted to practice in Rhode Island and Massachusetts and is a member of the Board of Governors of the Rhode Island Association of Justice (RIAJ) and a member of the Rhode Island Women’s Bar Association.

Sean P. Feeney is a partner with the Law Firm of Hamel, Waxler, Allen & Collins. He is admitted to practice in Rhode Island, Illinois and Wisconsin. Mr. Feeney is a former special counsel to the City of Providence, military prosecutor with the United States Marine Corps and Special Assistant United States Attorney for the Central District of California.

 

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