Playing your cards right

December 17, 2006

They're easy to buy, simple to wrap and one size fits all. They make holiday giving a little less personal, but two-thirds of consumers say they plan to buy several. They are prepaid gift cards and U.S. retailers and restaurants expect to sell more of them this year - about $80 billion worth - than ever before.

As the perfect stocking stuffer, they have one quirk: They may be the only gift that is supposed to be returned. The growth of the gift-card phenomenon has caught most states off guard. Recipients often discover that when they try to redeem their cards, they get hit with hidden fees or, even worse, learn too late that the cards have expired and aren't worth the plastic they're printed on.

It took three legislative sessions to enact safeguards, but Marylanders now have some protection against businesses that try to boost profits above the face value of cards they sell by imposing service charges and other consumer-unfriendly practices. After bills to regulate gift cards failed in 2003 and 2004, a measure sponsored by Baltimore County Sen. Katherine A. Klausmeier and Howard County Del. Neil F. Quinter made it through the 2005 legislature. Retailers were given until this past July 1 to prepare for the changes required when the bill became law.

In passing the law, Maryland joined about 20 states that regulate gift cards and certificates. Specifically, businesses here are prohibited from selling gift cards that carry service fees or expiration dates within four years after they are issued. There are exceptions - prepaid telephone cards, discount coupons and cards sold by banks, credit companies and malls - and the law covers big-box chains as well as tiny mom-and-pop shops. To make sure that consumers aren't fooled by the fine print, state lawmakers got rid of the fine print. Conditions and terms of a gift card must be printed on the card or its envelope in type no smaller than 10 points (not much smaller than the text you're now reading).

Retailers and their lobbyists who fought state lawmakers' efforts to give consumers this reasonable protection ought to hang their heads in shame. The booming gift-card market - this year's sales may top 2004's receipts by 45 percent - is a revenue bonanza for many stores. Nationally, about 10 percent of all cards are never redeemed because holders either lose or forget about them. That translates into billions of dollars in profits that stores take in without exchanging goods.

Maryland's gift-card law is a laudable step toward helping customers recoup the full value of the cards they hold. There's no reason the next step can't be to do away with expiration dates altogether. After all, paper currency doesn't expire.

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