Will Congress Battle Breakage?
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.
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There are 9 comments, add your thoughts now!
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.
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.
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.
David,
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?
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.
CK
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.
I think you mean Charles Schumer - Democrat from New York.
Nice catch Rena! Thanks!
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
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