Credit, Shopping 

Will Congress Battle Breakage?

Email  Print Print  

The Democrats have a lot on their plate but I’m wondering if they’ll renew their efforts to battle “breakage,” the amount consumers lose on gift cards because of expiration dates, processing charges, and other ridiculous maintenance and dormancy fees. According to TowerGroup, a consulting arm of MasterCard, approximately $8 billion is lost in breakage every single year compared to $3.5 billion lost due to credit and debit card fraud. Consumers lose more because of breakage than fraud. That’s a pretty surprising stat (even if you factor in the likely bias of a consulting group subsidiary of a credit card company that has a fat piece of both the credit/debit market and the gift card market).

In October 2004, Sen. Charles Schumer, Democrat in New York, introduced “The Fair Gift Card Act” that would’ve eliminated dormancy, inactivity and service fees with only a few reasonable exceptions (dormancy fee if the card wasn’t used in 2 years). Schumer’s bill also would’ve also made it illegal to sell gift cards with an expiration period of less than five years but the Senate Banking Committee never looked at the bill. Then, several months later, Rep. Rodney Frelinghuysen, Democrat in New Jersey, introduced the “Gift Card Protection Act,” which would prohibit expiration dates and fees on gift cards but the bill never made it out of the House Committee on Energy and Commerce.

Now that the majority has swung the other way, even if it is a slim one in the Senate, perhaps these bills will make a comeback and get at least a little bit more attention from the public.

Source: January issue of Cards & Payments.

{ 12 comments, please add your thoughts now! }

Related Posts

RSS Subscribe Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.

12 Responses to “Will Congress Battle Breakage?”

  1. abarton says:

    Last I checked, you can still buy merchandise, at any store, with cash and it has no expiration date. Sorry if this is crass, but I think we can’t keep writing legislation to deal with consumer stupidity. I don’t see why Congress should have to waste any time writing a bill because consumers are too lazy to shop for an actual gift but too embarrassed to give cash. If you are ignorant enough to let a social taboo, such as giving someone cash, make you purchase a gift card, then it is your own fault if the receiver doesn’t end up using the card.

  2. David says:

    Its ridiculous that breakage even exists. People have given this money to these companies in exchange for a gift card; they should automatically never expire. I know here in California they don’t, but it should be nationwide.

  3. Debt Hater says:

    I think people should just skip the gift cards. What’s the point? Just give people the cash. I promise they won’t lose a wad of bills.

  4. Ashley Barton says:


    People have given money to these companies for a service known as a gift card. This is no different than any other service that will end up expiring. You don’t call your cable company at the end of the month and ask them to credit your account because you didn’t use their service that month or only used it a couple of times. You paid up front for it and if you don’t use it, then it is your own fault, but you do have an option of not buying the service and using a free alternative. If consumers don’t like the stipulations that retailers have put on gift cards, then don’t buy them. Besides, gift cards have to much of a control factor associated with them, in my opinion, rather than give someone cash that they could spend anywhere, the gift card giver has decided that they will dictate where the receiver can spend the money. What if the gift card receiver doesn’t shop at that store or has had a bad experience and has decided that they won’t shop at that store again, now what are they suppose to do with the gift card they have received?

  5. CK says:

    I’m of the belief that as long as none of the fees or expiration dates are hidden as long as everything is out in the open (mice type legalese does not count) anything should go. Buyer beware and what not.


  6. CF says:

    Predatory terms of expiration and excessive fees should be banished, but I don’t agree that they should all be banished. Any of these ‘non-use penalties’ accessed after 1 year seem legit to me.

  7. Rena says:

    I think you mean Charles Schumer – Democrat from New York.

  8. jim says:

    Nice catch Rena! Thanks!

  9. S says:

    I agree with what most of the other people have responded. Congress needs to stop wasting time with stupid legislation to cover the butts of people too lazy to take responsibility for their own actions (or lack thereof). That’s like saying credit cards should get rid of late fees because it’s hurting consumers. While it would be nice, any one can avoid them simply by paying their bills on time. It also subsidizes rewards programs for those of us who do pay on time 🙂

  10. Mike says:

    All you folks yapping oh-self-righteously about “paying bills on time” or “don’t buy them if you don’t like them” or making absurd analogies to irrelevant examples ought to learn how to read. That way you might come off sounding like you have the slightest clue what you’re talking about.

    These are DEBIT cards bought as GIFTS. We didn’t agreee to receive them, It’s not a mutually agreed to contract like a damned cable company, and there are no bills to pay.

    The people getting screwed are the recipients, not the purchasers.

    I received a $100 vanillavisa card as a gift in June of 08. On the back of the card it says that a service fee of $1.50/mo will begin after the 13th month. In December, they charged the card $2.50 as a service fee. When I looked at their TOS, it turns out they raised the rate to $2.50 after SEVEN months (the card was apparently purchased in May 08). This TOS was adopted in April of 08, BEFORE I even received the card with the wrong information imprinted on it.

    So after 8 months in my posession, my $100 gift has been reduced to a $95 gift. Vanillavisa made $6.95 on the sale and $5 (so far) skimming off MY principle. Now I have to find someplace to spend the last $7.20 before the 17th of next month, or they’ll grab ANOTHER $2.50. Two months after that, the card will be emptied completely right back into the pockets of Vanillavisa.

    There is no way anyone is going to paint this as “normal business”. It’s predation, pure and simple. Outlawing these usurious bastards is NOT a congressional waste of time, it’s a congressional DUTY.

  11. Mike says:

    Re my previous post, perhaps I should buy a $7.20 calculator with my dwindling funds. 😉

    Please edit:
    “sale and $10 (so far) skimming”
    To read:
    “sale and $5 (so far) skimming”

Please Leave a Reply
Bargaineering Comment Policy

Previous Article: «
Next Article: »
Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2016 by All rights reserved.