Gift Cards May Have Strings Attached

Illinois Passes Law to Protect Consumers

August 20, 2004
Buying someone a gift card has become a popular solution to the birthday-holiday quandary when you haven't a clue as to what to buy. It's not as crass as handing someone an envelope full of cash, and it allows the recipient to get what they really want.

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But you may be paying for that convenience, in the form of hidden fees or charges. In Illinois, the legislature has passed and the governor has just signed a law to protect consumers from these charges.

"Gift cards have a cash equivalent, but when stores start charging unnecessary or hidden fees, it's as if gift cards are the gift that keeps on taking," said Illinois Attorney General Lisa Madigan, who helped draft and secure passage of the legislation.

"This legislation is critical when it comes to protecting consumers and ensuring they have the information they need to make decisions that won't cost them later."

The use of gift cards has grown 20% every year since they were introduced in 1996 and now constitutes a $32 billion industry. Hidden fees and dormancy charges are often attached to gift cards without the knowledge of the purchaser of the user. For example, some gift cards deduct $2 a month if the card is not used for six months.

The new Illinois law offers an incentive to retailers who remove all fees and charges from gift cards, exempting them for the Uniform Disposition of the Unclaimed Property Act. It also requires clear disclosure of all fees, charges and expiration dates to the purchaser or user of the gift cards.

The Illinois law could well become a model for other states, since it drew bipartisan support - and even had the backing of the business community. David F. Vite, President and CEO of the Illinois Retail Merchants Association, lent his groups support to the measure, saying it was a common sense measure that Republicans, Democrats, business and consumers could all agree on.

Three years ago Illinois State Treasurer Judy Baar Topinka worked with Vite's group to pass consumer legislation removing expiration dates from gift certificates and gift cards.

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