Buying gift cards this holiday? Federal bill tries to create no-expiration rule

Gift cards are everywhere, and especially in the minds of stocking-fillers.  We bring you this worthwhile update, on efforts to pass a law that bans expiration dates on credit cards.

And on first blush, the thought comes jumping out: Why should the federal government care to create legislation that affects a minor and relatively self-regulated part of commerce?  Really, do we need the government to step into gift cards?

That matter is debatable.  Clearly, the federal government has incrementally started looking at how to change the way merchants and retailers end up with a fairly large amount of money that lands in their lap.

Advocates say retailers are the undeserved winners of large amounts of money because card receivers either forget to redeem cards or lose them.

An analyst has said Americans each year spend about $65 billion in gift cards, excluding bank-issued prepaid cards. And of that total roughly $6.8 billion goes unredeemed, based on research by TowerGroup, a financial-consulting firm.

Gift-card providers argue such laws are unneeded and unfair, forcing them to gather information that they haven't had cause to gather in the past. In response to a New Jersey law, American Express has said that it plans to stop selling cards in the state rather than have to comply with the law.

Hence, this update on efforts in Congress to create rules that would prevent the creation of gift card deadlines.

Here's the backdrop: The Gift Card Consumer Protection Act, introduced by U.S. Sen. Richard Blumenthal (D-Conn), would prevent companies that file for bankruptcy from selling gift cards and require them to accept and honor unredeemed gift cards.  Currently, if you get a gift card from a retailer that declares bankruptcy, the prospects of redeeming it range from slim to none.

Blumenthal said these protections would significantly strengthen present law, which permits expiration of cards after five years, and non-use fees after one year. The new bill would bar such deadlines and fees at any time.

In addition, the bill would extend gift card protections to certain types of cards that current federal protections do not cover, including loyalty, reward and promotional gift cards, such as cards you redeem with credit card points.   

The bill also tries to prevent companies from hiding or not clearly disclosing fees that hit the cardholder if not used by a certain time.