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November 20, 2007


DiNapoli: Don’t Fall Victim to Gift Card Traps this Holiday Season

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With the holiday shopping season set to begin Friday, State Comptroller Thomas P. DiNapoli today warned consumers to make sure they ask the appropriate questions when purchasing gift cards or they could face significant fees.

“Gift cards are a great gift option,” DiNapoli said. “But all too often, consumers are not aware of the fees that can eat into the value of a gift card. Consumers should be sure they know all the terms and conditions of the gift cards they buy. No one wants to give a gift that shrinks in value if it’s not used right away.”

Gift cards often come with terms and conditions that can decrease the value of the gift card. These include charging:

  • a service fee when the card is purchased;
  • a dormancy fee if the gift card is not used within a certain period of time;
  • a fee to call and check the balance remaining on the card; and
  • a replacement fee for lost or stolen gift cards. The bar code number and proof of purchase are needed to replace cards.

“Under New York State’s gift card law, businesses selling gift cards are required to disclose the card’s terms and conditions to consumers, including any fees. Additionally, the law prohibits monthly service fees unless the card goes unused for an entire year,” said Assemblywoman Audrey I. Pheffer, Chair of the Assembly Consumer Affairs & Protection Committee. “Consumers should keep these rights in mind when purchasing a card this holiday season.”

“Gift cards are a very popular purchase that individuals make for loved ones and friends, but consumers need to know their rights in order to ensure that the value of their gift cards are not diminished by hidden fees,” said Senator Charles J. Fuschillo, Jr., Chairman of the Senate Committee on Consumer Protection. “A state law that I co-authored requires companies to disclose any terms or conditions that apply to their gift cards. I urge all consumers to read these disclosures so that they know what they are paying for this holiday season.”

Gift cards may expire and no longer be accepted after a certain period of time. If a balance remains on a card after a consumer makes a purchase, he or she may be required to apply that balance toward another purchase, rather than getting cash back even if only a small amount remains on the card.

New York State law prohibits retailers from charging dormancy fees for the first 13 months after a gift card is purchased. Consumers should also ask questions when buying pre-paid credit cards. These cards, which often carry a major credit card logo, may not be subject to state law and the 13-month dormancy rule.

DiNapoli’s office created a list of important questions to ask when buying a gift card that will be distributed to state employees and available at community events attended by staff of the Comptroller’s office. The list and frequently asked questions about gifts cards are also available on the Comptroller’s website at www.osc.state.ny.us.

Unclaimed gifts cards issued by New York corporations are turned over to the Comptroller’s office as abandoned property after five years, but in most cases no identifying information is provided, making it extremely difficult to return the property to its rightful owner.

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