Lawmaker seeks ban on time limits for gift cards

Kirsten Searer

Wednesday, Jan. 5, 2005 | 10:57 a.m.

You've probably got a stack of them at home this time of the year.

Holiday gift cards were projected to surpass apparel as the most popular gift this past holiday season, according to a recent survey by Deloitte & Touche.

But Assemblyman David Parks, D-Las Vegas, was perplexed last year when he tried to redeem a $25 gift card to a local mall and was told it was worth just $18.

Many malls -- along with some retailers and restaurants -- set expiration dates on their gift cards, or they start deducting money if they are not used within six months or a year.

Parks plans to introduce a bill this year to bar all retailers from putting time limits on gift cards worth at least a certain amount, either $25 or $50.

It's unfair to put "artificial expiration dates" on cards that should remain valid, he said.

Statistics show that about 12 percent of gift cards are never redeemed, he said.

Assemblyman Joe Hardy, R-Boulder City, also submitted a bill draft request to ban retailers from refusing to redeem gift cards at their full value.

"My personal feeling is gift cards are cash, and cash shouldn't expire," Hardy said. "I have a hard enough time knowing where I put the gift card."

The issue of gift cards is hot among state legislators around the country. The National Conference of State Legislatures reports that more than 40 bills throughout the nation were introduced in 2004 to regulate expiration dates on gift cards and gift certificates.

Nevada law does not yet address expiration dates or dormancy fees on gift cards, but state Treasurer Brian Krolicki said he believes the fees are "highly abusive."

"You've bought an asset," Krolicki said. "What gives a corporation, the retailer, the right to essentially exhaust that asset you've purchased?"

Additionally, state law allows the state treasurer's unclaimed property division to collect money from gift cards if they haven't been redeemed in three years. But Krolicki said that's difficult to do, largely because many corporations are incorporated outside of Nevada.

"If I'm incorporated in Delaware, who's not to say that Delaware gets the unclaimed property?" he asked.

And sometimes, the companies don't know who bought the cards, and therefore don't know where to return the money, he said.

The issue needs to be pursued through federal legislation, said Krolicki, who is past president of the National Association of Unclaimed Property Administrators, a division of the National Association of State Treasurers.

"It is a federal commerce issue," he said.

But in the wake of consumer complaints, many states have attempted to solve the issue on their own. California, for example, has some of the toughest laws on the books that ban expiration dates and dormancy fees on gift cards.

That's where Hardy said he got the idea. A constituent called him and pointed out California's new law, which he said makes sense.

"I don't think the retailers are going to lose any money by allowing their gift cards not to expire," Hardy said. "Quite frankly, if I was a retailer I would do this voluntarily."

And many retailers do. Large chains such as Target and Sharper Image do not put time limits on their gift cards.

But retailers cannot count the money they receive from gift cards as revenue until the cards are redeemed, said Paul Enos, manager of government affairs for the Retail Association of Nevada.

"If the card goes unused, it stands as a liability on the books until the value has been redeemed," Enos said.

The Retail Association hasn't taken an official position on the bills yet, Enos said. While businesses likely would have reservations about the idea, he said he understands legislators hear complaints from constituents who look at gift cards as cash.

"Do I like it when government tells business what to do? No," he said. "I understand why they would want to do it."

Most local malls put some time limit on their cards, which typically can be redeemed at any of their stores. The Fashion Show, for example, deducts $2.50 a month from a card balance if it is dormant for six months.

Other malls, such as the Boulevard or the Galleria, deduct $2 a month on cards that have been inactive for 12 months.

The Galleria launched its gift card program on Sept. 28 and already has sold almost 40,000 cards, said Vicki Rousseau, marketing director for the mall.

She said the mall's bank services deduct the $2-a-month fee after a card is inactive for a year.

"It's basically like any account maintenance fee on any account that you would have, it just depends on how the bank works it," she said.

Ultimately, retailers realize that gift cards are a good deal for them regardless of expiration dates because the cards draw in customers to spend money, Parks said.

He said he recently dusted off a $25 gift card to Borders Books & Music that was several years old. And when he left the store, he walked out with $100 in merchandise.