Find out the gift card rules

The bankruptcy of big retailers, including Sharper Image and Bombay Co., have consumers rightly worried about whether it makes sense to give gift cards this holiday season and to ask what would happen if a store folds.

Manhattan Advertising & Media Law, a Manhattan Beach law firm, has put together a nifty online gift card map that provides a state-by-state summary of the nation’s gift card statutes. Users can click on any state to read a brief summary of that state’s gift card statutes, including any provisions for bankruptcy filings, abandonment terms and fees.

According to the firm’s principal, D. John Hendrickson, “We wanted to create a gift card map that’s easy to use, so people can quickly learn about the gift card laws in any state.”

If you click on California, you will find out that retailers are not allowed to put expiration dates on gift cards and gift certificates. Hendrickson said that only five states, California, Montana, New York, Oklahoma and Washington, have specific statutes dealing with a gift card’s value in the event of a bankruptcy filing, closeout or liquidation sale.

But questions remain about whether consumers would be able to make that stick. State laws, including the one in California, have proved ineffective in protecting gift card holders in bankruptcies, said Anthony Giorgianni, associate editor of Consumer Reports.

That's why a coalition of consumer organizations has asked the Federal Trade Commission to protect shoppers from losing money on gift cards when retailers file for bankruptcy protection. They want the federal government to require stores to place money from gift card sales in a trust account that would be used to honor the cards if the merchants continue operations under the protection of the bankruptcy court.

Hendrickson cautioned that his firm's map "is strictly for educational purposes and does not constitute legal advice." He also noted that cards issued by financial institutions are generally governed by federal laws and regulations and are not included in the map.

-- Jerry Hirsch

Photo: A variety of retail gift cards are seen on a kiosk at a store in Santa Clara, Calif. Credit: Associated Press

Comments

[Austin Chu]

Great post. I'm totally going to use the map as a reference. I work for a company that manages and tracks gift cards, and often times it's hard to explain to our customers the rules and regulations. Gift cards, is one of the least consistent gifts out there. The rules differ from state to state, and it's hard to keep track of all of them. My advice? If you're feeling uneasy about buying gift cards, give cash instead. However, if you love gift cards, buy them from reputable companies, and do your research before buying them. Or you can buy them from us, LeverageCard.com. If you buy your gift cards from us, we'll protect your purchases if retailers file for bankruptcy. Look at it this way: free gift card insurance.

[Dawn]

I am very interested in this case and all the appeals and think more people should get involved to put Simon Gift Cards out of business.

October 29, 2008

2008-R-0598

FEDERAL COURT DECISION ON PRE-PAID GIFT CARDS

By: Kevin E. McCarthy, Principal Analyst