Slashdot Mirror
WA Bans Gift-Card Expirations, Fees
theodp writes "The Seattle Times reports on new legislation that makes WA one of 15-20 states that have passed or are in the process of adopting laws that ban expiration dates on gift certificates, which enjoyed sales of $40+ billion last year. The consumer protection law is also expected to address the cat-and-mouse games retailers play of shopping for states with unclaimed-property laws that allow them to pocket unused gift-card value. As it so happens, Delaware state law requires a company to send unclaimed gift certificate monies to the state, while Idaho allows a company to keep the cash for itself. While an Amazon.com spokeswoman said the company would adhere to the new WA law for WA residents, she declined to say why the Seattle-headquartered and Delaware-incorporated Amazon established an Idaho company two years ago called A2Z to handle its gift-card operations."
If a company has a "gift certificate" they have a contract with the buyer to provide the benefit to the buyer's designee. If nobody claims the money under the controlling state law (we might want to designate a state for the purposes of the contract) then the money is abandoned property and escheats to the state. Anything else is a windfall for the company - and remember, absent the structure of laws the company could not exist. Pay the piper and lower the tax burden.
Besides, the company will have a major incentive to find the designee so that they can make their ordinary profit - rather than lose everything. Consumers benefit all around!
Belive me if you want, but I'm a former Amazon.com retail customer service monkey, and I was employed when the the A2Z shell company was created. We we're essentially told that Idaho was the home of the new company for the express purpose of being able to keep expired GC's. This move coresponded very close in time to a change in policy to never extend the life of a GC past it's original date. Previously, all GC's were 1 year, but we would renew them over and over again so long as you called/emailed and asked. When I left, it was changed to 2 years, but under no circumstances could the date be moved back.
When we all asked about just how shady this move (and dozens of other matters you don't want to know about) was, it was always sold to us as "It will help us profit, which will make your stock go up."
However, we were not to mention these reasons to customers, but rather to fill them with some BS about having the freedom to serve them better or something like that. This resulted in the day I got in trouble for "telling the truth to a customer." Seems they didn't appreciate me explaining to a customer why Idaho is a great place to start a shell GC company.
I think everyone should work for Amazon.com for at least a couple months. You will forever appreciate whatever other job you're at, plus you will have hundreds of hilarious stories to tell.
There are other ways of getting to the money. Simon Properties, a popular Mall management / owner company, offers gift cards. For each month of inactivity, they charge a fee ... something like $1.25 or so, around what an ATM fee might be. So if you get a $40 gift card, use $30 of it and leave it for 5 months, you've got a $0 balance.
Starbucks is or was doing something similar if I recall correctly.
They'll get you one way or another.
AC
I've more than once managed to use an expired gift voucher, with some gentle persuasion.
I guess it boils down to the store and how rigid they are with their policies, but if they reject it, then they run the risk of you shopping elsewhere.
If it's redeemed at a store, all you need to find state of residence is a flash of that person's drivers licence. The gift certificates I'm thinking of were usable online only, so the mailing address was assumed to be in your state of residence.
A friend of mine has gotten around the taxes his state puts on certain internet sales by sending his purchases to a relative in Arizona, which he visits every few weeks or so anyway. Sort of an interesting way to beat that system...
If my answers frighten you, stop asking scary questions.
"Gift Cards" offered by retailers are one of those phenomena in which it pays to read the fine print. Some people would assume, incorrectly, that there is some kind of "set standard" for gift card practices, when, in fact, you don't really know what you are "buying". I worked for a retailer that, on occasion gave away "$25 coupons" (not gift card/certificates) with every "$50 purchase", but, due to fine print in the company's "gift card" policy, the shopper could not apply "gift card purchases" toward that offer. The way the fine print stated it, the "purchase" of a gift card is not a "purchase" at all, as the actual "purchase" occours when the gift card is redeemed.
I always thought this was a little shady, as the customer is actually handing over their money (ie: purchasing) when they buy the gift card, but my company's legal team didn't see it that way, insisting that "gift cards" did not constitute a "product" being purchased, it was simply money exchanged between "accounts".
I'm not entirely sure we need a law to govern this. If someone is naive enough to take money that is good everywhere and make it good only in one place and expire after a while, then so be it I say.
I wonder why it's acceptable to send someone an Amazon gift card as a present, but it's not acceptable to send them $20 cash, which would be more generally useful.
Maybe it's because then we would realize that the cash exchange cancels out to zero. If we convert the cash to a non-interchangeable form of private money, it makes it seem like the whole exercise has some kind of point.
I guess it's yet another example of an opportunity for smart proprietors to profit off of a common logic flaw in the human brain.
...this was a statistic quoted to me by a guy who sold these for a living. I sat next to him on a plane back in January.
He sold gift cards to smaller companies, mom and pop stores (not Best Buy or Amazon type juggernauts), and used the main selling points that it was often instant revenue, and the 12% that was never used became pure profit for the company.
He also said that these things sold themselves. I guess he never tried to sell them in Delaware.
they could get rid of that pesky, so much per month charge for unused card, thing like they have on the starbucks card...
Starbucks makes it out like it is costing them a fortune to keep a database file of how much you have on their card.
I will explain, too long, I will sum up, You get a card at $B, put money on it, if you don't use it for a certain period, they wipe it clean and you are done, or if you neglect to use it for a period they charge you for not using it...
sound fair to you, or should I say, sound fare?
Don't know about you but it leaves me with a bad taste of burnt coffee in my mouth, of course this just might be the $B coffee I had this morning.
flinging poop since 1969
I have never understood gift cards or gift certificates. If I don't know what to get a person I do the best thing possible, get them a nice card they will like, a book, and 20$. Then the recpiaint gets what he/she wants and I get the satisfaction of knowing I didn't just give them 20$ at the last minute. Gift cards give money to a store you may or may not shop at for no real benefit to the recipiant. Last Christmas I received 2 25$ gift cards to chain resturants form family. Unfortunately I live in rural Georgia and it is a 30 minutes drive to the nearest McDonalds and an hour plus drive to a Buffaloes, Moe's, Joe's crab shack, Roadhouse Grill, etc.
SO would someone here please explain why people buy gift cards instead of cheap gift + cash? (Which is all giftcards are in my eyes)
There is nothing wrong with being gay. It's getting caught where the trouble lies.
Why not use the existing check laws as a guide? IANAL, but I believe in most states, a check left uncashed after 6 months can be deemed abandoned property.
I have worked for both banks and wrote payroll software. Banks treat checks being redeemed that are more than 6 months old as 'dead checks' and have policies about not honoring them. Our company in Maine regularly had state auditors review the books to make sure we were turning in all monies for payroll and accounts payable checks older than 6 months that were still outstanding. It then becomes the state's job to find these people or businesses. Only after a period of time (I don't know what period that is) does it become state funds.
This applies to personal checks also. In theory, if you send your ex-wife a check and she doesn't cash it after 6 months, you are supposed to notify the state and give them the money. Not that that has ever happened to me that I am aware of or have any remaining records.
Ever see those lists of names in papers asking people to contact your friendly state government?? Now you know where some of them come from. I don't know if it is such a huge windfall, the state spends a lot of money auditing books and advertising to find these people, and I'm sure a lot of entrepeners spend a lot of time trying to convince people that they can 'find lost money' for a cut. It would be very interesting to see what amounts states actually end up with.
I rarely read replies, it's my opinion and if you thought about your opinion a little more, I'm OK with that.
I myself just received a 300-yen gift certificate
Um... 300 yen is less than 3 American Dollars ($2.79 to be exact) with the current exchange rate. You must know some pretty cheap people...
Uttering logically derived and empirically supported truths to the disciples of the orthodox establishment.
Why not just give them cash? Some teens and tweens aren't very wise with their choices, and I prefer to let their parents worry about their spending. For example: one Christmas my grandparents gave both my brother and myself decent checks. Mine went into a bank account where I slowly depleted it over the course of several months for textbooks and entertainment in college. My younger high-school age brother immediately spent the entire thing on fake Asian-looking swords from a hobby store. My parents had to ban all relatives from giving him cash for a few years because they were so horrified by how he blew a huge chunk of money. Gift certificates would have avoided that problem.
Adults are a different issue. My grandmother likes to write me checks but tell me what I'm supposed to spend it on (e.g., furniture). That's sort of like a gift certificate in the sense of indicating where the money should be spent, but I can choose which furniture store to visit. And I still often give my brother gift certificates because the sword incident sticks in my mind. *grin*
Stores need to have a finite life to gift cards. Their accountants need to know what's in stock, what's capital and what's currently able to be claimed. How long can a store sit on capital in the name of unclaimed gift cards?
They need to keep the cash flow going in the name of a good economy. Why should they be force to forever ponder the future fate of capital based on 25 year old gift cards?
And for all of you out there questioning the rights and wrongs of cash vs. gift card... Go ask Martha Stewart... This is Slashdot, not Queer Eye for the Straight Guy; Christmas Edition. Now off with ya!
Dedicated Cthulhu Cultist since 4523 BC.
Massachusetts has a similar law already, and so some retailers try and skirt it by indicating its actually an ATM-like card, and not an actual "gift card".
Here's the deal:
Gift CERTIFICATES and gift CARDS are actually two seperate products, covered under different laws.
A gift CERTIFICATE will have an expiration date normally of 3-6 months from date of issuance. When a company sells a CERTIFICATE, they book the sale immediatly, and then book a loss when the certificate is redeemed.
A gift CARD, however, is a pre-paid credit card. Like a normal credit card, it has an expiration date that is usually astronomically longer than a CERTIFICATE.. if -ever-. And a company does not book a SALE on the card until the card is actually USED. A company that I used to work for issues gift cards with NO expiration date - however, on the back of the gift card, it does state that if the card is not used at any point during a consecutive three-year period, $1.00 will be taken from the card (and they get to write that up as a sale, in the company) for every successive year after that three year period, until the card is used by a customer (then it starts it's three years over again), or the value of the card is depleted (by either use, or charging $1.00 to it every year for virtually damn forever).
In this company's case, it's about booking it. If the card is ever lost, and never recovered, it will eventually expire, and generate future sales at the rate of $1 per year. Yes, in the case of a $400 gift card, that could take a bare minimum of 403 years from date of issuance.
"Champagne for my real friends - and real pain for my sham friends!" http://ericblade.postalboard.com/
My experience with Radio Shack:
I am a little short on cash and about to start adjunct teaching at a local college. I buy a computer on credit from Radio Shack. My parents help me out at Christmas and give me a $100 gift certificate.
I had trusted and liked Radio Shack, I never used the Gift Certificate to pay for the computer. When I decided to go buy some fun stuff with the certificate I was shown the smallest text on the certificate, it stated the certificate had an expiration date.
I hope that Radio Shack enjoyed the $100, I have never purchased another item from them. I went onto teach intro technology courses for 5 years and made it a point to never reccommend Radio Shack.
Large companies have the ability to pull up your buying habits for the last five years but the gift certificate expires in one year? I can understand that companies can not have gift certificates uncashed forever. The expiration should be clearly marked. I can assure you that Radio Shack lost alot more than $100 and I would guess whoever figured out this trick got a raise.
Just plain and simple bad buisness, reading some of the beginning comments about Amazon encourages me to stay away from them.
In Michigan, gift certificates are supposed to last five years. After five years, if it is worth more than $50, then the state is supposed to get the money. Any individual who can prove the money is theirs can get the money from the state. If it's less than $50, then the business can just keep it after five years.
However, apparently no one follows this law. I see plenty of businesses that attempt to limit their gift certificates, some even for only 6 months.
I wonder if Washington will have any more luck than Michigan in enforcing their law.
If someone says he and his monkey have nothing to hide, they almost certainly do.
M&S = Marks & Spencers, high street department store type place for those not in the UK.
They don't expire.
3 years ago, my mother spent the M&S gift vouchers that they had recieved at their wedding 22 years after having been given them..
No doubt the person behind the counter was shocked to be given a gift voucher older than they were, but it was still valid.
However, it hadn't survived inflation very well, 2 1 vouchers were still worth 2. Unfortunately, 2 is not worth nearly as much as what it was worth when the vouchers were given.
M&S took a decent value of cash for these bits of paper & redeemed them 22 years later (after having had the cash to invest for 22 years) for something worth much less.
Which is why I hate getting gift vouchers - I've never had one for over 22 years, but if I did it would depreciate in real value... and I'd be locked into spending it at a specific place.
FGD 135
In gift card parlance, unclaimed money is referred to as 'breakage' and is the major portion of profits in gift card schemes.
Even in states that insist that the breakage is returned to the states, the gift card company simply adds a large service charge for the 'processing' and retains almost all of it. This is especially relevant for any leftover value (usually small) after the purchase. Breakage can be typically around 10%, so it is a big deal.
I work in this industry, so maybe I can shed some light on the situation.
When one purchases a gift card from XYZ store, say for $50.00, the card has no link to the customer. This means there is no name or other personal data stored on the system for that card number. We store the card number, date of issuance, location of issuance, and amount of issuance for each card.
When XYZ takes the money for that gift card, it is not counted as revenue, since no good or service has been purchased. In the normal life of a card, purchases are made, and eventually the value of the card goes to zero. In the mean time, XYZ stores the funds in an account and makes interest off of the money.
When gift cards were first issued, part of the "agreement" was that after 24 months of non-usage (the clock begins again after a purchase, refund, addition of funds, or a balance inquiry (for some clients). After the 24 months, a dormancy fee of (say) $2.00/month kicks in back to the last time the card was used. This means now our $50.00 gift card has $2.00 ($50 - ($2.00 * 24)) left on it. After month 25, the value would be zero.
Dormancy is used not only to remove old cards off of the system, but to move funds to the retailer in the form of a service charge. All was well and good (from the retailer's point of view) until a case was brought forward in California. The arguement was that these are customer's funds and the Company has no right to claim them because no goods or services were exchanged. The case was won, but a new problem was presented -- who gets the funds?
Remember, no personal data is attached to the card number, so there is no way XYZ can go back to the purchaser and say hey -- you have $50 you forgot about!
Enter, the state. The law already states that a bank has to turn over dormant accounts to the State or Federal government (depending if the Bank is State of Federal) after a period of time (7 years if I remember correctly). States are seeing these Gift Card funds as a easy source of revenue. Although all one has to do to claim the money is produce the gift card to the State, the likelyhood of this happening is small. This basicly means low risk funds coming into the State that although technically remains on the books as unclaimed funds, can be used to help cover state budgets.
This is a simplified version of the issue, but this for the most part what is happening. More States are looking into this as it appears friendly to the consumer while moving funds into state coffers.
Beware of Sleestak
My mother dislikes gift cards and gift certificates because if the store goes out of business, you lose that money. Would we now get to stand in line before they declare bankruptcy and try to get our money back?
If you're worried about store closings, expiration dates, etc. just send plain old cash as a gift. Cash is good anywhere for anything, doesn't lose value more than "normal" and doesn't expire.
--The Programming goddess from Gorflaz
For two years the company has free use of the gift card money to obtain free interest. Sure there is some maintenance cost, but not much. After that time the money is unused and really does not belong to the company. For the benefit of all people, the money could best be used as other taxes to the state or federal government, although I don't think the federal gov is allowed to collect those kinds of revenue as tax. Perhaps the card agreement should have an opt-in/out clause of whether they want the expired card money to go to the corporation or the state.
Whether you call it a gift card, gift certificate, or whatever, I cannot emphasize enough the need to choose your merchant carefully and read the fine print! I know in our area, restaurants come and go with great regularity. While a restaurant gift certificate can be a wonderful gift, there is some risk in holding on to it. My wife works for LL Bean and I think their approach to gift certificates is consumer friendly. They record who purchases the gift certificate at the time of sale. You can spend the certificates you bought at any time and in any way (e.g. web site, store, phone). You don't even have to have the original certificate in hand; they keep an online record of it. The only problem we've run into is when you give one as a gift, LL Bean's record still shows it as yours so it's possible for you to spend one you've given away! Still, all-in-all, it works very nicely. Of course, if they go bankrupt, we're going to be out some dough!