Lawsuits Filed Against Issuers of Holiday Gift Cards

Holiday gift cards have become the center of lawsuits filed after consumers discovered fees and expiration dates that rendered them worthless over time. Two Atlanta residents and three state attorneys general have filed lawsuits against a mall owner whose Christmas gift cards depreciate in value and expire. As a result of the litigation, New York Democrat Sen. Charles Schumer has sponsored the Fair Gift Card Act intended to establish guidelines for fees and expiration dates.

The nation's largest shopping mall owner, Simon Property Group, Inc, sells cards that allegedly violate state laws in Massachusetts, Connecticut, New Hampshire and Georgia, according to the lawsuits against it. A $2.50 monthly fee is assessed if the card isn't used within seven months, and it may expire after a year. "A Simon gift card with a $25 face value is worth only $12.50 after the 11th month," Massachusetts Attorney General Tom Reilly stated. Sen. Barney Frank, a Massachusetts Democrat who supports Reilly's legal actions against Simon Property, remarked that gift cards that lose value make a "pretty cheesy" present.

Some states have already passed laws making it illegal to impose the inactivity fees and expiration dates on gift cards, expected to be an $89 billion industry in 2007. Sen. Schumer's legislation would make gift cards valid for at least five years and would prohibit an inactivity fee unless the card's value is less than $5 or it hasn't been used for 24 months and the fee is $1 or less. It would simultaneously allow each state to strengthen its laws for gift cards. Consumers Union is lobbying for passage of the act to protect the givers and recipients of gift cards.