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Will Congress Battle Breakage?

Posted By Jim On 01/22/2007 @ 5:04 pm In Credit,Shopping | 12 Comments

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 [3].


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